The Asian Tsunami: Aid and Reconstruction After A Disaster

26 December 2004
Over 220 000 men, women and children in poor countries in Asia were
swept away in the great Asian tsunami of 2004.
This book is dedicated to their memory.
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The Asian Tsunami
Aid and Reconstruction after a Disaster
Sisira Jayasuriya
Professor of Economics, School of Economics and Finance,
La Trobe University, Melbourne, Australia
Peter McCawley
College of Asia and the Pacific, Australian National
University, Canberra, Australia
In collaboration with Bhanupong Nidhiprabha, Budy P. Resosudarmo

and Dushni Weerakoon
A JOINT PUBLICATION OF THE ASIAN DEVELOPMENT BANK

INSTITUTE AND EDWARD ELGAR PUBLISHING
Edward Elgar
Cheltenham, UK • Northampton, MA, USA
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© Asian Development Bank Institute 2010
All rights reserved. No part of this publication may be reproduced, stored in a

retrieval system or transmitted in any form or by any means, electronic,
mechanical or photocopying, recording, or otherwise without the prior
permission of the publisher.
Published by
Edward Elgar Publishing Limited
The Lypiatts
15 Lansdown Road
Cheltenham
Glos GL50 2JA
UK
Edward Elgar Publishing, Inc.

William Pratt House
9 Dewey Court
Northampton
Massachusetts 01060
USA
A catalogue record for this book

is available from the British Library
Library of Congress Control Number: 2010922139
ISBN 978 1 84844 692 2
Printed and bound by MPG Books Group, UK
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Contents
List of contributors vi
Foreword by Masahiro Kawai vii
Preface ix
List of abbreviations xii
1 The tsunami 1
2 Response to disaster: issues 12
3 The matter of money 40
4 Indonesia: the first two years after the tsunami 68
5 Sri Lanka 123
6 Thailand 171
7 Conclusion 225
Index 261
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Contributors
Nisha Arunatilake is Research Fellow, Institute of Policy Studies of Sri
Lanka, Colombo, Sri Lanka.
Sisira Jayasuriya is Professor of Economics, School of Economics and
Finance, La Trobe University, Melbourne, Australia.
Peter McCawley is Visiting Fellow, Arndt-Corden Division of Economics,
College of Asia and the Pacific, Australian National University, Canberra,
Australia and was formerly Dean, ADB Institute, Tokyo.
Suahasil Nazara is Professor, Faculty of Economics, University of
Indonesia, Depok, Jakarta, Indonesia.
Bhanupong Nidhiprabha is Associate Professor, Faculty of Economics,
Thammasat University, Bangkok, Thailand.
Budy P. Resosudarmo is Associate Professor, Arndt-Corden Division
of Economics, College of Asia and the Pacific, Australian National
University, Canberra, Australia.
Paul Steele is Environment Advisor, Asia and Pacific Regional Centre,
Bangkok, Thailand and was formerly Associate Research Fellow, Institute
of Policy Studies of Sri Lanka, Colombo, Sri Lanka.
Dushni Weerakoon is Deputy Director, Institute of Policy Studies of Sri
Lanka, Colombo, Sri Lanka.
vi
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Foreword
Natural disasters of various kinds are an ever-present risk in most coun-
tries in Asia. It is usually the poor who are at highest risk, particularly in
developing countries, because the places where the poor live and work
tend to be especially vulnerable when disasters strike.
In recent years, a number of megadisasters have struck the Asian region
that have incurred very heavy costs in terms of human lives: the 2004
Asian tsunami (causing a loss of nearly 230 000 lives); cyclone Nargis in
Myanmar in 2008 (over 130 000 lives); the earthquake in Sichuan in the
People’s Republic of China in 2008 (over 80 000 lives); and the earthquake
in the Kashmir region of India and Pakistan in 2005 (over 70 000 lives). In
addition, there are numerous other natural disasters which are less serious
in terms of human lives lost but which have high localized economic costs
and disrupt the lives of millions of people: regular widespread flooding in
major cities such as Jakarta and Manila and across Bangladesh, typhoons
in the People’s Republic of China and Viet Nam, and severe droughts in
India and Pakistan are but some examples.
One of the consequences of the 2004 Asian tsunami was a sharply
heightened awareness across developing countries in Asia of the need to
give higher priority to disaster risk reduction programs across the region.
Multilateral action has supported measures to give greater attention to
disaster risk reduction issues at the national and local level. The Hyogo
Framework for Action adopted in Kobe in early 2005 urged all countries
to make major efforts to reduce the risk of disasters by 2015. There was
increased awareness of the need to pay attention to pre-disaster programs
as well as strengthen capacity to respond in the post-disaster period.
More recently, in 2009, the United Nations issued Risk and Poverty in a
Changing Climate, the first biennial assessment of global disaster risk.
This book is a study in the response to the largest natural disaster in
Asia in recent history. The assistance provided by communities, govern-
ments, multilateral agencies, and non-government organizations following
the Asian tsunami was an extraordinary humanitarian effort. It was also
a very large aid program which involved thousands of different organi-
zations. Indeed, as a collective effort, it was one of the largest single aid
efforts that the international community has ever joined in for a natural
disaster affecting developing countries. In looking to improve disaster risk
vii
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viii Foreword
reduction programs across Asia in the future, therefore, there are valuable
lessons to be learnt from the experience of the regional reconstruction fol-
lowing the 2004 Asian tsunami.
Through the production of studies of this kind, ADBI is committed
to a program of research and capacity building that supports the Asian
Development Bank’s overarching goal of promoting poverty reduction in
the Asia-Pacific region.
Masahiro Kawai
Dean, Asian Development Bank Institute
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Preface
This book grew out of the idea that national researchers in Asia should be
provided with an opportunity to critically examine the emergency relief
humanitarian response and reconstruction efforts in their respective coun-
tries to the great Asian tsunami of 2004. A series of natural disasters have
struck several countries in Asia since then – most recently an earthquake
in Padang in West Sumatra in Indonesia (October 2009) as this preface is
being written – highlighting the importance of developing effective strate-
gies to cope with such disasters.
Following the tsunami, a huge, complex and region-wide aid program
quickly got underway. The effort involved thousands of agencies from
Asian national governments, foreign governments, multilateral donor
agencies and non-governmental organizations. Before long, a vast number
of reports, surveys, and evaluations were prepared. But inevitably, much
of this material was prepared by international aid workers with limited
local experience in the field in Asia. It seemed appropriate to invite
local research workers to write about the response to the disaster from a
national perspective so that international views could be supplemented by
views from the region.
The resulting book draws on several aspects of the contemporary lit-
erature in the international development debate. This book is a product
of joint efforts. The individual country studies were authored primarily by
national researchers. The Indonesia chapter was co-authored by Suahasil
Nazara and Budy P. Resosudarmo, the Sri Lanka study by Dushni
Weerakoon, Sisira Jayasuriya, Nisha Arunatilake and Paul Steele, and the
Thailand chapter by Bhanupong Nidhiprabha.
The issues in the book need to be considered with reference to the lit-
erature on disasters – and especially the extensive discussion that has been
taking place in recent years about responses to disasters in developing
countries. The Asian tsunami itself dramatically highlighted the terrible
risks that megadisasters in poor countries pose to human security in the
region, especially the security of people who live in poor and vulnerable
communities. The disaster led to a sharp increase in awareness across
Asia of the need to strengthen disaster risk reduction policies. It should
be mentioned here at the outset that in carrying out research for this
study we have benefited from many reports from international agencies
ix
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x Preface
and researchers including the hundreds of reports of project work imple-

mented in the field by numerous donor agencies. Many of these reports are
excellent. They provide detailed accounts of the work done by thousands
of workers in the field. In what follows, we have sought to draw on them
and complement their analyses and findings.
The book is also a study of aid delivery. It thus draws on the interna-
tional literature about aid and development. The response to the tsunami
– by the Asian regional governments and communities as well as the
international community – was a very large and unanticipated aid effort.
Indeed, as a collective endeavour, the indications are that a national and
international aid program amounting in total to perhaps US$17 billion or
more was organized to support relief, rehabilitation and reconstruction
projects following the tsunami. It was widely observed that this repre-
sented one of the largest disaster response programs ever undertaken in
developing countries. Many issues of aid policy and delivery arose as thou-
sands of individual aid activities were implemented in the hope of ensuring
that the US$17 billion would be used effectively.
We should emphasize that this study has not been prepared with the
aim of finding fault with the response to the 2004 tsunami. Doubtless some
mistakes were made, and doubtless not every single one of the very large
number of aid projects undertaken under very difficult circumstances in
the field was successful. Rather, our aim has been to review the overall
response following the 2004 tsunami disaster and to consider what broad
lessons for policy might be drawn from the experience.
One of our main conclusions is that in the circumstances, the initial
emergency relief effort can be considered a major achievement, due in
large measure to the often spontaneous responses of local communities
and measures taken by national governments. We also believe that the
major assistance program supported by both Asian national governments
and the international community was very successful in achieving the goal
of providing widespread help following the 2004 tsunami. But another of
our conclusions is that donor governments and aid agencies do not coor-
dinate their activities well – with each other or with the national govern-
ment – when disasters occur; in this respect, the international community
should aim to do better. And perhaps the most important conclusion we
reach is that much greater priority needs to be given to pre-disaster pro-
grams in developing countries in Asia; both regional governments and the
international community need to give much higher priority to strengthen-
ing local preparedness across the region so that when disasters strike, local
communities are themselves able to respond quickly to minimize the harm
that is done.
Many people have helped prepare this book. We wish, particularly, to
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Preface xi
thank our colleagues in the ADB Institute in Tokyo who have given us
strong support. We also wish to acknowledge the invaluable contribu-
tions from the research workers and our colleagues at the University of
Indonesia in Jakarta, the Institute of Policy Studies in Sri Lanka, and
Thammasat University in Bangkok, and numerous officials from govern-
ments and donor agencies. Lee Smith provided excellent editorial assist-
ance in completing the book.
And, of course, we are most grateful to our spouses, Sreeni Jayasuriya
and Anne Willoughby, for their forbearance while we have been working
on this book.
Sisira Jayasuriya
Peter McCawley
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Abbreviations
ABAS Aceh Barat Selatan
ACFID Australian Council for International Development
ADB Asian Development Bank
ADPC Asian Disaster Preparedness Centre (Bangkok)
AIPRD Australia-Indonesia Partnership for Reconstruction and
Development
ALA Aceh Leuser Antara
ANAO Australian National Audit Office
AusAID Australian Agency for International Development
Bappeda Badan Perencanaan dan Pembangunan Daerah or Regional
Development Planning Agency
Bappenas Badan Perencanaan dan Pembangunan Nasional or National
Development Planning Agency
BBB Build Back Better
BOP Balance of Payments
BPN Badan Pertanahan Nasional or National Land Administration
Agency
BPS Badan Pusat Statistik or Central Statistics Agency
BRR Badan Rekonstruksi dan Rehabilitasi (Agency for the
Rehabilitation and Reconstruction of Aceh and Nias)
CFW Cash for work
CGI Consultative Group on Indonesia
CIDA Canadian International Development Agency
CIFOR Center for International Forestry Research
CNO Centre for National Operations
DAC Development Assistance Committee (of the OECD)
DAD Donor Assistance Database
DART™ Deep Ocean Assessment and Report of Tsunami
DDPM Department of Disaster Prevention and Mitigation
EC European Commission
ECHO European Commission Humanitarian Aid Office
ECLAC (United Nations) Economic Commission for Latin America
and the Caribbean
EIB European Investment Bank
ETESP Earthquake and Tsunami Emergency Support Project
xii
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Abbreviations xiii
EU European Union
FAO Food and Agriculture Organization
FFEM French Global Environment Fund
GAM Gerakan Aceh Merdeka or Free Aceh Movement
GDP Gross Domestic Product
GND Grama Niladhari Divisions
GoI Government of Indonesia
GOSL Government of Sri Lanka
GPP Gross Provincial Product
HFA Hyogo Framework for Action
HPG Humanitarian Policy Group (of the ODI)
IADB Inter-American Development Bank
ICT Information and communication technology
ICTA Institute for Construction Training and Development
IDLO International Development Law Organization
IDP Internally displaced person
IFAD International Fund for Agricultural Development
IFI International Financial Institution (such as WB and ADB)
IFRC International Federation of Red Cross and Red Crescent
Societies
ILO International Labour Organization
IMF International Monetary Fund
INCOSAI International Congress of Supreme Audit Institutions
INGO International non-government organization
INTOSAI International Organization of Supreme Audit Institutions
IPS Institute of Policy Studies (Sri Lanka)
IPS-TS Institute of Policy Studies – Tsunami Survey, 2005 and 2006
ISDR International Strategy for Disaster Reduction
JBIC Japan Bank for International Cooperation
LIBOR London Inter-Bank Offer Rate
LPEM Lembaga Penyelidikan Ekonomi dan Masyarakat or Institute
for Economic and Social Research
LRRD Linking Relief, Rehabilitation and Development
LTTE Liberation Tigers of Tamil Eelam
MDF Multi Donor Fund (of the World Bank, for Aceh and Nias)
MFAR Ministry of Fisheries and Aquatic Resources
MOF Ministry of Finance
MoU Memorandum of Understanding
NAD Nanggroe Aceh Darussalam
NDTF National Development Trust Fund
NDWC National Disaster Warning Center
NEER Nominal effective exchange rate
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xiv Abbreviations
NGO Non-government organization

NZAID New Zealand Agency for International Development
OCHA UN Office for the Coordination of Humanitarian Affairs
ODA Official development assistance
ODI Overseas Development Institute
OECD Organisation for Economic Co-operation and Development
PerpresPeraturan Presiden or Regulation of the President
Perpu Peraturan Pemerintah Pengganti Undang-Undang or Regula-
tion in Lieu of Law
PP Peraturan Pemerintah or Government Regulation
PRC People’s Republic of China
P-TOMS Post-Tsunami Operation Management Structure
PTSD Post-traumatic stress disorder
RADA Reconstruction and Development Agency
RALAS Reconstruction of Aceh Land Administration System
RAND Recovery Aceh-Nias Database
REER Real effective exchange rate
RMIT Royal Melbourne Institute of Technology
Rp Rupiah (Indonesian currency)
Satker Satuan Kerja or Work Unit
SET Security exchange index (in Thailand)
SIDA Swedish International Development Cooperation Agency
SLR Sri Lanka Rupee
SMEs Small and medium-sized enterprises
SMERU SMERU Research Institute (Jakarta)
SPAN Sensus Penduduk Aceh dan Nias or Aceh and Nias Population
Census
TAFLOL Task Force for Logistics, Law and Order
TAFOR Task Force for Relief
TAFREN Task Force for Rebuilding the Nation
TAFRER Task Force for Rescue and Relief
TEC Tsunami Evaluation Coalition
TGLL Tsunami Global Lessons Learned
THRIS Tsunami Help and Recovery Information System
TICA Thailand International Development Cooperation Agency
TWS Tsunami warning system
UN United Nations
UNCTAD United Nations Conference on Trade and Development
UNDP United Nations Development Programme
UNEP United Nations Environment Programme
UNFPA United Nations Population Fund
UNORC UN Office of the Recovery Coordinator for Aceh and Nias
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Abbreviations xv
UNOSE United Nations, Office of the Special Envoy for Tsunami

Recovery
USAID United States Agency for International Development
USGAO United States Government Accountability Office
WB World Bank
WCDR World Conference on Disaster Reduction
WHO World Health Organization
Note: Throughout this book the term ‘billion’ refers to 1000 million and
‘trillion’ refers to 1000 billion.
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M2406 - JAYASURIYA.indd xvi 7/10/10 15:38:29
1. The tsunami
Early in the morning of Sunday 26 December 2004, Boxing Day, just
before 8 am local time, an earthquake rumbled in the deep in the sea off the
coast of Northwest Sumatra. Immense geological pressures triggered
the earthquake. The Indian Ocean tectonic plate moved abruptly against
the Eurasian plate causing a 100 foot bulge on the seabed along a plate
more than 600 miles long. The sea bed rose by up to 5 metres in places,
displacing a phenomenal volume of water. A series of smaller aftershocks
followed.1
The main earthquake prompted immediate warnings in geological
centres around the world. The energy of the earthquake generated giant
waves travelling at speeds of up to 1000 km per hour across the Indian
Ocean over a giant area. But there was very little time for countries in the
region to act. In any case, rapid-response warning systems in most poor
countries across Asia were non-existent or ineffective. There was, in fact,
very little that could be done.
In the largest nearby provincial town in Indonesia, Banda Aceh at the
tip of North Sumatra around 300 km from the epicentre of the main quake,
thousands of people rushed into the streets. Buildings and houses across
the town rocked. Much local damage was caused by the earthquake. But
worse, far worse, was to come. As teams of people in Banda Aceh began to
organize immediate assistance after the quake, giant shockwaves from the
deep sea earthquake were spreading outwards from the epicentre. In the
deep waters of the open ocean, shockwaves of this kind are barely notice-
able. But as the shockwaves reach shallow water, the height of the waves
quickly builds up. The people in the streets of Banda Aceh had no idea
that a tsunami was on the way.
Around half an hour after the earthquake, while large crowds were
working in the streets of Banda Aceh to cope with devastation across the
city caused by the quake, a huge surge of water began to build up from the
sea. At first, the water receded in a very strange way as if the lowest of low
tides was occurring. And then a series of waves surged forwards as if the
tide was rushing back in. Twenty-metre waves burst across the foreshores
of the town. But just as damaging was an astonishing surge that, like an
unimaginable high tide with tremendous power, swept up the creeks and
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2 The Asian tsunami
inlets and into the streets of Banda Aceh, pushing and sweeping and crush-
ing all that lay before it. Nothing could resist the immense tide. Boats and
cars and trucks were carried along; houses were pushed aside; children
were plucked as nothing from their mothers’ arms; thousands of people
were carried away in just a few minutes. Within perhaps one hour of the
initial earthquake deep under the sea, over 160 000 Indonesians had died.
This was just the beginning. The tsunami arrived as a series of waves.
The waters retreated and advanced in cycles of over thirty minutes
between each peak. In most places, the third wave was the most powerful,
occurring about an hour and a half after the first wave. Smaller tsunamis
continued for a number of hours. And then, after the destruction in Banda
Aceh, during the next few hours a great natural disaster unfolded across
more than a dozen poor countries in Asia as the waves sped out across the
Indian Ocean. As one report put it (TGLL 2009: 3 and 16), ‘the magnitude
and scope of the destruction ranks it as one of the greatest natural disas-
ters in recent history . . . . when the tsunami was finished, it was the most
destructive disaster of its kind in history.’
As the tsunami spread outwards around the tip of North Sumatra and
quickly outwards to Thailand, South Asia, and eventually even to Africa,
many thousands more were swept away. Even five years later the precise
death toll and the full catalogue of physical disaster is uncertain. The exact
death toll will never be known. However it is clear that almost 230 000
people died, well over one million people were displaced (Table 1.1) and
over US$10 billion in damage was caused to infrastructure, houses and
other property.
There was an unprecedented response to the disaster. Nearby local
communities reacted first, helping in every way they could, using what-
ever resources could be mobilized. This was followed by a fast national
response, and later a huge global response. Governments, international
agencies and millions of people across the world donated to help commu-
nities devastated by the tsunami. As one survey of the disaster (Bernhard
et al. 2005: 82) observed:
The nature of the tragedy, combined with the clear and constant communica-
tion through the media, led hundreds of millions of individuals around the
globe to donate funding to various national and international charities and
relief organizations. An outpouring of this magnitude from individuals has
never been witnessed before for a single event.
Most of the affected countries were entirely unprepared for the disaster.
This was not surprising. Countries like Sri Lanka had not experienced an
event of this kind for millennia.2 Even Indonesia, which frequently experi-
ences serious natural disasters, was caught unprepared by the scale of the

The tsunami 3
Table 1.1 2004 Asian tsunami: estimated deaths and displacements
Country People lost Displaced

Indonesia(a) 167 540 566 898
Sri Lanka 35 322 519 063
India 16 269 647 599
Thailand 8 212 n.a.
Other (10 countries) 555 34 700
Total 227 898 1 768 260
Note: (a) Includes Nias earthquake.
Source: USAID Fact Sheets (estimates).
disaster.3 The tsunami subjected the affected countries and communities to

unprecedented stress in terms of disaster management. Local communities
and national governments immediately organized emergency relief opera-
tions and, helped by international agencies quickly provided food, clean
water, basic health services, and temporary shelter. This initial relief effort
has been widely described as remarkably successful given the circumstances.
The high-profile international effort to help reconstruction and recovery
was also widely hailed for its scale and generosity (Schwartz 2006: 6):
Tsunami recovery represents the largest ever mobilisation of donor funds for
an emergency and reconstruction effort. All over the world, governments,
international agencies and multilateral donors, non-government organizations
(NGOs) and individuals supported the provision of humanitarian relief and
reconstruction to affected areas. NGOs and the Red Cross movements alone
raised over $5 billion, alongside $8 billion pledged by governments and others
for recovery and reconstruction.
The promised funding initially appeared to be more than adequate to

cover both initial relief and reconstruction. Indeed the expected flow of
international assistance was such that – as incorporated explicitly into
the reconstruction plans in Indonesia – the aim was not simply to replace
destroyed housing and infrastructure but to ‘build back better’.
By the end of 2005, towards the end of the first year after the tsunami,
the response effort supported by international aid programs seemed to
have been a resounding success. There was satisfaction – and more than
a whiff of self-congratulation – in many of the early assessments based on
progress reports prepared by national agencies and major international
organizations. The observation by Inderfurth et al. (2005) captured the
mood of many of these reports:

4 The Asian tsunami
While full reconstruction may take five years or longer, if the level of commit-
ment demonstrated by the international community is maintained, the tsunami
will be remembered as a model for effective global disaster response, not just as
a disaster. Because of the speed and generosity of the response, its effectiveness
compared to previous (and even subsequent) disasters, and its sustained focus
on reconstruction and prevention, we give the overall aid effort a grade of ‘A’.
However these early ultra-rosy assessments seemed rather overblown even

then. They certainly failed the test of time.
In fact, soon after relief operations began, problems with the relief and
reconstruction effort began coming to light. During 2005 there were wide-
spread reports of inefficiencies in the distribution of funds, unsatisfactory
plans for the rebuilding of houses, slow progress in reconstruction, allega-
tions of corruption, cost escalations, funding gaps following the slow dis-
bursement of funds, and coordination failures. A report presented to the
Prime Minister of Sri Lanka in December 2005 by the Institute of Policy
Studies (IPS) of Sri Lanka highlighted the coordination problems that had
emerged following the influx of large numbers of donors including many
‘new’ NGOs. The report (Jayasuriya et al. 2005: 17) noted that ‘Many
NGOs lack experience and local knowledge, and in their haste to spend
monies disregard local circumstances and community needs.’
In July 2006 a major study prepared by the Tsunami Evaluation
Coalition (TEC) reviewed the experience of the international relief and
reconstruction efforts. The study (Telford et al. 2006: 93) observed that:
some international agencies managed well; but many did not . . .. Local contexts,
institutions and contributions were frequently neglected. Affected people’s will
and capacity to move from reliance on handouts to rebuilding their lives were
inadequately exploited . . . They were marginalized, even undermined, by an
overwhelming flood of international agencies controlling immense resources.
The IPS Report from Sri Lanka also raised the issue of the costs of the
rehabilitation and reconstruction efforts. The study (Jayasuriya et al.
2005: 53) warned that ‘cost blowouts will almost certainly create funding
gaps, make reconstruction tasks difficult and impose further strains on
government fiscal expenditures’.
Subsequent developments confirmed that problems persisted despite
substantial progress with reconstruction in both Sri Lanka and Indonesia.
By early 2007 the impact of unexpected inflation in costs was being widely
acknowledged. In a report to Congressional Committees in February
2007, the United States Government Accountability Office described the
impact on its tsunami aid projects in the following terms (USGAO 2007:
Highlights):

The tsunami 5
Although both of its signature projects – one in Indonesia and one in Sri
Lanka – are under way, USAID has increased initial cost estimates, reduced
or canceled some project activities, and may extend completion dates . . . In
Indonesia, estimated construction cost per mile increased by 75 percent . . . ;
USAID reduced the length of road to be built by over one third . . .
In December 2007 the World Bank tsunami website reported (World Bank
2007) that in Sri Lanka:
The Tsunami Emergency Reconstruction Program I . . . ended on March 31,

2007. At completion, there are still about 15,000 families in need of perma-
nent housing. These are primarily landless families, and due to this increase in
housing needs, with only about US $8 million remaining, additional funding
would be required to complete all units of the housing program.
The World Bank tsunami website also reported (in December 2007) –
citing sources from the Indonesian Reconstruction and Rehabilitation
Agency (Badan Rekonstruksi dan Rehabilitasi, or BRR) – that 30 000
houses remained to be built. In both Indonesia and Sri Lanka there were
reports not only of cost escalations producing funding gaps but also of
institutional and procedural bottlenecks hindering the use of available
funds.4 These problems led to delays in reconstruction and prolonged
the suffering of affected groups. Nevertheless, the reconstruction effort
continued to make headway and five years after the tsunami the restora-
tion of the major physical infrastructure in most of the severely affected
regions of Indonesia, India, Sri Lanka and Thailand was largely complete.
The many thousands of aid workers who participated in the tsunami relief
effort – both from within the affected countries and from overseas – can
certainly be proud of what was achieved. They confronted major problems
and overcame them to the best of their ability. It needs to be recognized
that the response, unprecedented in its scale and scope, was remarkable
not because it proceeded without any problems but because it was able to
address problems as they emerged. The effort was an immense undertak-
ing which involved communities, aid workers, governments and the wider
international community.
It is no exaggeration to describe some elements of the logistics of the
aid effort as similar in scope to a series of prolonged military operations.
Just as analysts consider it useful to consider the aims and achievements
of military exercises, so it is useful to ask broad questions about objectives
and outcomes of the tsunami aid effort across Asia. The tsunami was not
the first megadisaster to strike in poor countries in Asia, nor, unfortu-
nately, the last as more recent events show (see Table 2.1). How the world
responded to the 2004 tsunami should be examined so that all possible

6 The Asian tsunami
lessons can be drawn and applied in the effort to cope with the continu-
ing threat of natural disasters. This is a daunting task; discussion about
the lessons of the tsunami has already generated a significant literature,
primarily in the form of reports but also as journal articles and other docu-
ments, and is likely to present a major field of research for many years to
come (ISDR-BIBLIO 2006; Cosgrave et al. 2009).
AIM OF THE STUDY
The broad aim of this study is to make a contribution to the task of

improving disaster risk reduction policy in Asia by examining several
aspects of the delivery of tsunami aid in three countries (Indonesia, Sri
Lanka and Thailand). We recognize that the rapid delivery of emergency
assistance – of food, water, medicine, sanitation and shelter – in the imme-
diate aftermath of a disaster is the single most critical issue in minimizing
the human costs of disaster. However, as development economists, our
comparative advantage is not in the analysis of the logistics of the delivery
of emergency services and technical aspects of disaster mitigation. Our
focus in this volume therefore is just as much on the subject of the links
between shorter-term relief assistance and longer-term development.
The subject of linking relief, rehabilitation and development (LRRD)
has received increasing attention in recent years. It was the main focus
of the major A Ripple in Development? report on post-tsunami assistance
prepared with the support of the Swedish aid agency, SIDA (Brusset et al.
2009) as well as other studies on the delivery of tsunami aid (Masyrafah
and McKeon 2008). This book will thus give much attention to the institu-
tional and economic policy issues raised in different stages of the relief and
reconstruction effort, to the role of international assistance provided by
the global community, and to how a more productive partnership can be
established between local and international agencies to enable communi-
ties to better undertake disaster risk reduction.
In the following chapters we look at the main factors which had a
bearing on institutional responses to the provision of aid following the
tsunami. Some of these key factors, for example, influenced the speed
and mode of delivery of assistance. There were other factors which actu-
ally hampered inter-agency coordination. We draw on economic theory
to shed light on why reconstruction efforts triggered unexpectedly high
localized inflation, particularly in the form of rapid construction cost esca-
lation, which generated substantial funding gaps. We review the overall
responses to the tsunami disaster from all involved parties – international,
national and local, public and private – paying particular attention to

The tsunami 7
the international aid effort. A special focus of the study is that we draw
on analytical perspectives from the viewpoint of research workers in the
affected countries. We conclude with thoughts on what lessons might be
drawn from this remarkable experience.
Several themes are taken up in the studies in the book. The different stages
of the relief and reconstruction process must be clearly recognized. Each
stage requires a different response. Another clear theme that emerges from
the 2004 tsunami experience highlights the critical role of local communi-
ties. Local communities responded quickly in each of the three countries
to the huge challenge of providing emergency assistance in the immediate
aftermath of the disaster – the period most important in terms of saving
lives. It takes time for even national level assistance to arrive at a disaster-hit
location – and a significantly long time when the affected location is remote.
It takes even longer for international assistance to arrive. Local communi-
ties must be at the centre of any viable disaster management strategy.
A third theme focuses on the international aid effort. In one sense, much
of this book is a study in aid effectiveness. The role of international assist-
ance in global disaster management is acquiring major significance. The
size of the international aid response program was one of the most striking
aspects of the relief and reconstruction efforts following the 2004 tsunami.
There was an outpouring of sympathy across the world. Overall, the offers
of aid from the international community came to around US$14 billion in
total assistance (though, as we discuss later, the precise amount of actual
disaster-related assistance is difficult to determine). In any case, it is clear
that the scale of this international aid effort dwarfed any previous similar
disaster relief assistance program and the promised aid was deemed
adequate to cover the entire cost of reconstruction. Indeed, the fact that
local and national agencies pledged several billions more sometimes went
almost unnoticed. Against this background, we focus on key issues such
as the following:
● Who promised what?

● Were the promises fulfilled to a satisfactory extent?
● What are the lessons learned?
As noted in Chapter 3, the original promises from aid donors were fre-
quently vague. It was often not easy to determine the actual amount
of new assistance to the country targeted for tsunami reconstruction.
Further, the different suppliers of assistance were inclined, consciously or
unconsciously, to set their own criteria for judging success in aid delivery
– and indeed, were inclined to adjust the criteria from time to time to fit in
with circumstances.

8 The Asian tsunami
From the earliest stages, the relatively large scale of the international
aid program and the involvement of numerous actors raised difficult coor-
dination challenges. Coordination was difficult not simply because of the
number of actors of various types but also because they had a multiplic-
ity of objectives and modes of operation. This is a recurring theme that
runs throughout our discussions: actors in the international aid arena
have multiple, and often quite complex, objectives. The real objectives of
major actors are often not what they say their nominal objectives are. Their
nominal objectives are the goals that they publicly proclaim. But the real
objectives of policy may, and indeed often do, encompass both humanitar-
ian objectives and other important goals. As will be seen below, for various
reasons donors had especially strong motives for providing help in the case
of the Asian tsunami – motives which have been absent in the case of some
other recent disasters. This aspect of donor aid policy, often tactfully left
unmentioned in the international aid literature, is dramatically illustrated
by the sharp contrast between the response of the international com-
munity to the Asian tsunami in 2004, on one hand, and to the disaster of
cyclone Nargis in Myanmar in 2008 on the other.5 And even when donors
said that they were committed to cooperating closely with other agencies,
individual donors had specific agendas which made it difficult, sometimes
nearly impossible, to coordinate aid efforts and to maximize the effective-
ness of the delivery of aid. These difficulties of coordination applied just as
much to the activities of NGOs as to the programs of governments.
Donors often tended to be supply-oriented rather than demand-
responsive. As shown in the case of various housing construction projects,
the tendency of donors to deliver their preferred form of aid raises par-
ticularly difficult issues when donor agencies are not responsive to local
customs and cultural sensitivities. Mechanisms are needed to ensure that
local communities affected by natural disasters have opportunities to
outline their priority needs. Mismatches between donor and community
views can lead to friction, and sometimes even open conflict.
Most importantly, the tsunami experience highlights the need for sub-
stantial amounts of aid to be delivered quickly. But there are many institu-
tional constraints that hinder speedy responses from assistance agencies.
Recognizing this need to provide assistance quickly, we also examine the
issue of whether aid should be delivered as cash or in-kind and argue that
in some circumstances there is a strong case for providing cash assistance
to disaster affected communities at an early stage in the relief effort.
Yet another theme discussed is the need to allow for significant con-
struction cost increases when large reconstruction programs are imple-
mented in places where construction materials and labour are in short
supply. The underlying economic forces that generate ‘Dutch Disease’

The tsunami 9
effects are discussed in Chapter 7. It is important to recognize that the

jump in prices of construction costs – resulting from sharp increases in
the demand for construction inputs in short supply – is likely to far exceed
the inflationary impact that might be caused by the injection of aid funds
into the economy. These sharp increases in costs were not anticipated by
reconstruction agencies following the Asian tsunami. In both Aceh and
Sri Lanka, construction costs nearly doubled and resulted in funding gaps;
significantly, this phenomenon was not an important issue in Thailand
where there were fewer supply constraints. There is a potential trade off
between the pace of reconstruction and the effective use of funds. There is
therefore a need to prioritize construction activities when problems of this
kind arise.
The book is structured as follows. Chapter 2 provides a broad overview
of the issues which need to be considered in reaching judgements about the
effectiveness of tsunami aid. Chapter 3 looks at the financial aspects of the
global assistance program in some detail. The three chapters that follow
discuss the country experiences of Indonesia, Sri Lanka and Thailand;
national researchers were primarily responsible for preparing these chap-
ters. The final chapter sets out the main conclusions and summarizes the
main findings.
NOTES
1. A useful briefing can be found on Wikipedia, 2004 Indian Ocean earthquake, http://
en.wikipedia.org/wiki/2004_Indian_Ocean_earthquake, accessed 31 July 2009.
2. Sri Lanka, for example, was completely unprepared for the tsunami. Sri Lanka experi-
ences periodic droughts, floods, landslides and the occasional cyclone. But the nation
had never experienced a tsunami, or indeed any other type of natural disaster of this scale
in recorded history. Even the tsunami generated by the great Krakatoa eruption of 1883
in Indonesia had lost much of its power by the time it reached Sri Lanka. While minor
earth tremors are not uncommon, no serious earthquake has occurred for three centu-
ries. Historical records indicate that a major earthquake in 1615 inflicted serious damage
with large numbers of casualties (http://www.lankalibrary.com/geo/portu/earthquake.
htm). Sri Lanka had no effective domestic hazard warning system, and had not felt the
need to be part of international early warning systems, such as the Tsunami Warning
System (TWS) in the Pacific (with 26 member countries).
3. Indonesia has since experienced several seriously destructive natural disasters although
none have approached the scale of the 2004 tsunami.
4. According to the same World Bank website, BRR has consistently under-spent its
budget allocations: ‘However, with the vast amount of reconstruction required to be
completed, BRR has not yet managed to disburse its annual budgets fully in the year
required, leaving much work still to be done’. In Sri Lanka, ‘while individual agencies
varied in performance, the bilateral and multilateral agencies had spent on average 29
per cent and 32 per cent, respectively, of committed funds by end 2006’ (Weerakoon et
al. 2007: 22).
5. Both were megadisasters in poor countries in Asia, with Nargis accounting for well over

10 The Asian tsunami
100 000 (by some counts, up to 140 000) deaths. Yet the international donor response
was entirely different: in contrast to the US$14 billion or so provided to tsunami-affected
countries, Myanmar received something less than US$500 million following cyclone
Nargis. One obvious reason for the difference, of course, is that the Government of
Myanmar was not cooperative with the international donor community in receiving aid.
But this was not the whole story. Many donor countries linked offers of aid to Myanmar
with specific conditions that were likely to be rejected.
REFERENCES
Bernhard, Richard, Y.Yritsilpe and O. Petchkul (2005), ‘Corporate philanthropy

in Thailand’, in Philanthropy in Disasters: Tsunami and After, Conference
Proceedings of the Asian Pacific Philanthropy Consortium, Kenan Instutute,
Phuket, 28–30 November.
Brusset, Emery, M. Bhatt, K. Bjornestad, J. Cosgrave, A. Davies, Y. Deshmukh, J.
Haleem, S. Hidalgo, Y. Immajati, R. Jayasundere, A. Mattsson, N. Muhaimin,
R. Polastro and T. Wu (2009), A Ripple in Development? Long Term Perspectives
on the Response to the Indian Ocean Tsunami 2004, Stockholm: SIDA, www.
sida.se/publications, accessed 20 August 2009.
Cosgrave, John, E. Brusset, M. Bhatt, L. Fernandez, Y. Deshmukh, Y. Immajati,
R. Jayasundere, A. Mattsson, N. Muhaimin and R. Polastro (2009), A Ripple
in Development? Document Review. Annotated Bibliography prepared for the
Joint Follow-up Evaluation of the Links between Relief, Rehabilitation and
Development (LRRD) in Responses to the Indian Ocean Tsunami, Stockholm:
SIDA, www.sida.se/publications, accessed 10 September 2009.
Inderfurth, Karl F., D. Fabrycky and S.P. Cohen (2005), ‘The tsunami report
card’, Foreign Policy, The Carnegie Endowment for International Peace, http://
www.foreignpolicy.com/, accessed 21 September 2008.
ISDR-BIBLIO (2006), ‘Tsunami’, Geneva: ISDR, http://library-isdr.unog.ch/cgi-
bin/Pwebrecon.cgi?v1=2&ti=1,2&CNT=50&Search%5FArg=tsunami%20%2B
%20ISDR%2DBiblio&Search%5FCode = FT%2A&Search%5FCode = FT%2A
&PID = ZnuCNzK2OwDx3hW7qdnFkrPY8fTb&SEQ = 20090929092212&SID
=1, accessed 24 September 2009.
Jayasuriya, Sisira, P. Steele and D. Weerakoon (2005), Post-Tsunami Recovery:
Issues and Challenges in Sri Lanka, Report presented to the Prime Minister of
Sri Lanka, Institute of Policy Studies, Colombo, November.
Masyrafah, Harry, and J.M.J.A. McKeon (2008), Post-Tsunami Aid Effectiveness
in Aceh: Proliferation and Coordination in Reconstruction, Wolfensohn Center
for Development Working Paper 6, Washington: The Brookings Insti-
tution, http://www.brookings.edu/~/media/Files/rc/papers/2008/11_aceh_aid_
masyrafah/11_aceh_aid_masyrafah.pdf, accessed 26 September 2009.
Schwartz, Eric (2006), ‘Responsibilities and challenges’, July, UNOSE website,
http://www.tsunamispecialenvoy.org/default.aspx, accessed 27 September 2006.
Telford, John, J. Cosgrave and R. Houghton (2006), Joint Evaluation of the
International Response to the Indian Ocean Tsunami: Synthesis Report, London:
Tsunami Evaluation Coalition.
TGLL (Tsunami Global Lessons Learned Project) (2009), The Tsunami Legacy:
Innovations, Breakthroughs and Change, TGLL Project Steering Committee, http://

The tsunami 11
www.reliefweb.int / rw / rwb.nsf / db900sid / MUMA-7RF7PQ ? OpenDocument,

accessed 26 August 2009.
USGAO (2007), Foreign Assistance: USAID Signature Tsunami Reconstruction
Efforts in Indonesia and Sri Lanka Exceed Initial Cost and Schedule Estimates,
and Face Further Risks, Report to Congressional Committees: Washington,
www.gao.gov/cgi-bin/getrpt?GAO-07-357, accessed 23 July 2009.
Weerakoon, Dushni, S. Jayasuriya, N. Arunatilake and P. Steele (2007), Economic
Challenges of Post-Tsunami Reconstruction in Sri Lanka, Tokyo: Asian
Development Bank Institute, http://www.adbi.org/files/dp75.sri.lanka.post.
tsunami.reconstruction.pdf, accessed 17 September 2009.
World Bank (2007), Sri Lanka Tsunami Recovery website, http://www.worldbank.lk /
WBSITE / EXTERNAL / COUNTRIES / SOUTHASIAEXT / SRILANKAEX
TN/0,,contentMDK:21594465 ~ menuPK:232812 ~ pagePK:2865066 ~ piPK:286
5079~theSitePK:233047,00.html, accessed 13 January 2009.

2. Response to disaster: issues
INTRODUCTION
The response to a megadisaster such as the 2004 Asian tsunami raises

many issues. And the response can be considered in various ways. The
assistance provided by communities, governments and NGOs following
the Asian tsunami was a remarkable humanitarian effort which needs to
be considered within the extensive literature that has grown up in recent
years about the need for better disaster response programs in developing
countries. But the response was also a very large and unanticipated aid
program. This aid program involved, under conditions of extreme stress,
thousands of national, regional and international organizations. Indeed,
as a collective endeavour, it was one of the largest single aid efforts that
the international community has ever joined in developing countries. The
effort therefore needs to be considered from the point of view of interna-
tional aid policy as well. This chapter considers these issues.
LITERATURE REVIEW
In recent years the international community has spent much time discuss-
ing ways to improve policy responses to natural disasters in develop-
ing countries. As the 2009 Global Assessment Report on Disaster Risk
Reduction issued by the United Nations noted, ‘Global disaster risk is
highly concentrated in poorer countries . . . Particularly in low and low–
middle income countries with rapid economic growth, the exposure of
people and assets to natural hazards is growing at a faster rate than risk-
reducing capacities are being strengthened, leading to increased disaster
risk’ (ISDR 2009b: 3).
Developing countries in Asia are particularly exposed to risks from
natural disasters. Of the ten major natural disasters with the highest death
tolls across the world since 1975, six have occurred in developing countries
in Asia (Table 2.1).
At the global level progress has been made in strengthening policies
but, as is usual with international discussions about worldwide issues, the
12

Response to disaster: issues 13
Table 2.1 Natural disasters with more than 50 000 fatalities, 1975–2008
Date Place Event Deaths Comment

1984–85 Ethiopia Drought 300 000
1976, July PRC, Tangshan Earthquake 242 000 Unofficial toll up to
700 000
2004, Dec Asia regional Tsunami 227 898 More than a dozen
countries
1983 Sudan Drought 150 000
1991, April Bangladesh Cyclone 138 866 Cyclone Gorky
2008, May Myanmar Cyclone 133 655 Cyclone Nargis
1981 Mozambique Drought 100 000 South Mozambique
2008, May PRC, Sichuan Earthquake 87 476
2005, Oct India, Pakistan Earthquake 73 338 Kashmir region
2003 Europe Heat wave 56 809 Various countries
Source: United Nations, ISDR (2009a: 4); Table 1.1 for Asian tsunami.
whole is dependent on the parts.1 Much depends on what can be done by

individual countries. Often the capacity of developing countries to imple-
ment the ambitious goals agreed to at international conferences is quite
limited.
At the international level, the annual World Disasters Report issued
by the IFRC (International Federation of Red Cross and Red Crescent
Societies) is an important source of information and commentary which
helps strengthen global coordination of disaster risk reduction policy.
Within Asia, perhaps because of an acute awareness of the risks of natural
disasters at home, Japan has played a major role in encouraging increased
attention to issues of disaster risk reduction.2 In 1994 at an international
meeting near Tokyo, the Yokohama Strategy for a Safer World set down
guidelines for natural disaster prevention, preparedness and mitigation.
The Yokohama Strategy was drawn up as a plan of action. A decade
later in early 2005, the World Conference on Disaster Reduction in Kobe,
Japan, reviewed progress made under the Yokohama Strategy. In Kobe,
five priorities for action were adopted:
● Ensuring that disaster risk reduction is a national and local

priority
● Identifying disaster risks and enhancing early warning systems
● Building a culture of safety using knowledge and education
● Reducing the underlying risk factors
● Strengthening disaster preparedness.

In the wake of the 2004 Asian tsunami there was sharply increased
awareness in poor countries in Asia of the high economic costs of disas-
ters. One World Bank study, for example, has estimated that economic
losses due to natural disasters are 20 times greater as a proportion of
GDP in developing countries than in developed countries (Parker et
al. 2007). And a recent AusAID report noted that ‘Over 95 per cent
of people killed by natural disasters are from developing countries’
(AusAID 2009: 7).
The Hyogo Framework for Action (HFA), adopted in Kobe in early
2005, urged all countries to make major efforts to reduce their disaster
risk by 2015.3 And in addition to the discussions about the HFA in Kobe,
it is clear that following the tsunami disaster, policy makers in develop-
ing Asian countries began to pay considerably more attention to disaster
management planning.4 There was increased awareness of the need to pay
attention to pre-disaster action programs as well as strengthen capacity to
respond in the post-disaster period (Marianti 2007: 13). In 2009, the United
Nations issued Risk and Poverty in a Changing Climate, the first biennial
assessment of global disaster risk (ISDR 2009a). The central message of
the report was that there is a close link between disaster risk and poverty,
and that ‘reducing disaster risk can provide a vehicle to reduce poverty,
safeguard development and adapt to climate change’ (ISDR 2009a: v).
The key findings listed in the report emphasized the need to identify the
underlying factors which exacerbate disaster risk in developing countries
and to adopt policies to reduce the risks (Box 2.1).
At the national level in developing countries in Asia three proposals, in
particular, have attracted attention from policy makers when considering
how to implement the advice set out in the various reports issued following
international conferences about disaster risk reduction:
● Establishing new national institutions

● Mainstreaming disaster reduction policy
● Establishing a national network of local disaster organizations
Implementation of each of these proposals is constrained both by

resources and, to some extent, by different views as to the best policy. In
practice, resource constraints impose tight limits on what governments
can do. Surprisingly, the resource constraints faced by governments in
developing countries in Asia receive little attention in the international
literature about disaster risk reduction policy in the region. In the absence
of resource constraints, it is easy enough to agree that it would be a good
idea to establish new national institutions to implement national disas-
ter policy. One suggestion sometimes made is that developing countries

BOX 2.1 UNITED NATIONS 2009 RISK AND

POVERTY IN A CHANGING CLIMATE:
KEY FINDINGS
● Global disaster risk is highly concentrated in poor coun-

tries.
● Most disaster mortality and asset destruction is intensively
concentrated in very small areas exposed to infrequent but
extreme hazards. But low-intensity damage to such things
as housing, local infrastructure and agriculture, which
erodes livelihoods, is extensive in many countries.
● Key factors contributing to high levels of disaster risk in
poor countries are poor urban governance, vulnerable rural
livelihoods, and declining ecosystems.
● Poorer communities suffer a disproportionate share of dis-
aster loss.
● Weather-related disaster risk is expanding rapidly. Climate
change is already changing the nature of weather-related
hazards.
● Progress towards reducing disaster risk is mixed. In some
directions, such as strengthening capacities and insti-
tutional systems, many countries are making significant
progress. But in other areas such as the mainstreaming of
risk reduction considerations into overall policies, there is
much less progress.
● Governance arrangements for disaster risk reduction in
many countries do not encourage the mainstreaming of
disaster risk factors into overall policy considerations. As a
result, countries have difficulty addressing the key factors
that contribute to high levels of disaster risk.
● Using specific policy tools, such as microfinance, micro-
insurance, and index-based insurance, helps tackle the
underlying drivers of disaster risk that impact on the
poor.
● A failure to address the underlying drivers of disaster risk
will result in dramatic increases in disaster risk and associ-
ated poverty outcomes.
Source: ISDR (2009b).

should establish a high-level national disaster council to determine policy

which might, in turn, be supported by a national development manage-
ment office to focus on implementation.5
And, indeed, sometimes institutions of this kind are established on
paper. But because many developing countries in Asia are short of both
money and skilled staff to support new organizations, the results of these
initiatives are often disappointing. There is limited value in establishing
institutions which are poorly resourced.6
Issues of policy are not necessarily easy to address either. For one thing,
bearing in mind that the institutions to implement policy are often not
strong in developing countries in Asia, there is a limit to the number of
cross-cutting issues that can be mainstreamed in an effective way at any
time. The agenda of issues which the international community often sug-
gests for policy mainstreaming in developing countries is already quite
extensive – gender, environment along with related issues of climate
change, health and safety, and a range of social issues such as those relat-
ing to minority groups, the aged, disabled citizens, and so on – so propos-
als to mainstream disaster risk reduction issues are, in effect, competitive
with suggestions to mainstream many other issues as well.
For another thing, there is not always agreement as to what extent par-
ticular administrative structures are likely to provide the best outcomes.
Recommendations to place responsibility (and, what is just as contro-
versial, resources) in the hands of national governments do not receive
universal support. A survey of the different models adopted in Latin
America (Freeman et al. 2003) reported ‘There is . . . disagreement in the
literature regarding the advisability of depending on national government
as the appropriate foundation for a comprehensive program [because]
. . . focusing natural disaster policy through existing government systems
enhances narrow power structures and draws away from local concerns
and initiatives.’
Commenting on the advantages of a decentralized approach, one
Indonesian observer (Marianti 2007: 19) noted that ‘Proponents of this
view prefer community-based projects and programs that are developed
by NGOs. Although this way cannot guarantee the quality of risk man-
agement, it is closer to affected people (thus more likely to capture their
needs) and can directly empower the local populations.’
Certainly there are pros and cons. Certainly some institutional capacity
is needed to support policy-making and implementation at the national
level. But in later chapters of this study it will be argued that the highest
priority in developing countries in Asia needs to be given to strengthening
local preparedness to respond to disasters.

SUPPLY SIDE ISSUES

The broad scope of issues discussed in literature about the provision of
humanitarian aid often focuses on the supply side of aid delivery. But
the demand side – what the people affected by disasters want, and what
their perceptions of the aid provided are – needs attention as well. It will
be useful to consider the tsunami aid program within the context of this
supply and demand framework.
One set of issues on the supply side of the provision of humanitarian
assistance concerns objectives of aid – the goals of donors, promises made,
and the conditions that donors set down in offering aid. Because of the
complex nature of aid policy, it will be useful as background for the dis-
cussion in the following chapters to note one key aspect of the objectives
which often influence the activities of aid agencies: the difference between
the nominal and the real objectives of humanitarian aid policy.
The generally stated motive for the supply of humanitarian relief – and
the motive usually given much emphasis by donor governments and other
donor institutions – is to help the affected populations. The Principles and
Good Practice of Humanitarian Donorship endorsed by major interna-
tional donor governments in Stockholm in 2003, for example, stated that
‘The objectives of humanitarian action are to save lives, alleviate suffering,
and maintain human dignity during and in the aftermath of man-made
crises and natural disasters, as well as to prevent and strengthen prepar-
edness for the occurrence of such situations’ (International Meeting on
Good Humanitarian Donorship 2003).
This statement of objectives (and the many similar statements made by
donors) may be regarded as a statement of the nominal policy of humani-
tarian aid programs. But in practice, real policy is influenced by other
important considerations as well. Indeed, the mix of factors that influences
donor policy, including decisions as to when and how to provide humani-
tarian aid, is complex. As a report prepared by the Tsunami Evaluation
Coalition (TEC) noted, aid agencies are generally accountable to three
main groups of stakeholders (Cosgrave 2007: 23):
● The donor public, the media and taxpayers (which involves ‘upward’
accountability)
● Other agencies or the common standards agreed by agencies (‘lateral’
accountability)
● The affected populations (‘downward’ accountability).
And it might be added that for many official bilateral agencies in donor
countries (which are major sources of international funding), issues of

upward accountability invariably involve also reporting to ministers, par-

liaments, and other powerful public sector agencies who have interests in
the determination of international aid policy.
Of these three main stakeholder groups, the realpolitik of the situation
is that it is the first and the third groups which tend to be seen as being the
most important within significant policy-making circles. And indeed it is
the first group which is generally given high priority, as Bill Clinton, in
his role as UN Secretary-General’s Special Envoy for Tsunami Recovery
observed (Clinton 2006a: 4): ‘Typically, demands for accountability come
loudest from donors – private and institutional – and implementing agen-
cies are more likely to focus on this kind of upward accountability. Too
often, the less organized voices of the survivors are not heard, and this
equally vital downward accountability is given second-priority at best.’
It is therefore useful to think of humanitarian aid policy as often having
the Janus-like quality of being obliged to look in two directions at once
– towards the needs of affected populations (‘downwards’) and simulta-
neously towards the wishes of the donors (‘upwards’).7 Commenting on
the pressures on different actors involved in the supply of aid following
the tsunami, the TEC survey (Cosgrave 2007: 11) observed that ‘huge
amounts of [aid] funding encouraged a virtual obsession with “upward”
accountability to donors, the media, and the public in donor countries.
This discouraged accountability to disaster-affected populations and
“lateral” accountability to other agencies and the governments of affected
countries.’
Nominal policy pronouncements make much of the needs of affected
populations following disasters. However in practice, real policy often
strongly reflects the preferences of ministers, parliaments and the media in
donor countries (Drury et al. 2005).
Coordination
Apart from these issues of broad policy, important practical aspects of the
aid effort concern the delivery of aid. An extremely challenging problem
following the Asian tsunami, right from the start, was the coordination of
aid work in the field.
It is in the nature of responses to megadisasters in developing countries
that the coordination of responses is likely to be difficult. On one hand,
the international community usually wishes to play a significant role,
offering assistance with various degrees of enthusiasm reflecting, amongst
other things, policy considerations in donor countries. On the other hand,
recipient governments and local institutions will be closely involved as
well, working to provide assistance through their own national channels.

Recipient governments and local institutions will not always be able to set
aside the resources which international agencies expect to be available.
Further, discrepancies between international offers of aid and the capacity
to absorb the aid are sometimes exacerbated by the marked differences in
capacity between international donor organizations and national agen-
cies within recipient countries. It was to be expected, therefore, that many
issues of coordination would complicate the delivery of tsunami aid.
One main challenge was how to coordinate the activities of interna-
tional donors, on one hand, and numerous national relief agencies, on the
other. There were problems of coordination both within each group, and
between these two rather different types of agencies. As the discussion in
the country studies below illustrates, the arrangements made for coordi-
nation varied from country to country depending on the local situation.
Issues of coordinating the activities of foreign agencies were particularly
complicated in countries such as Indonesia and Sri Lanka where foreign
programs were relatively large and where many national and international
NGOs (INGOs) quickly established relief programs (Scheper et al. 2006:
30):
During the first two months, an estimated 300 INGOs arrived in Aceh to assist
in the relief effort. As most of these agencies lacked local experience and facili-
ties, they spent the first three months providing relief supplies, conducting need
assessments and building their own staff and infrastructural capacity, often by
attracting the best and the brightest staff from local organisations. The lack of
contextual knowledge limited their ability to assess local capacities. Dozens left
after the first few months, having completed their work or lacking institutional
resources to match the scale of recovery operations.
In Indonesia, the establishment of a new body with considerable authority,

the Badan Rekonstruksi dan Rehabilitasi (Agency for the Rehabilitation
and Reconstruction of Aceh and Nias, or BRR), played a major role in
helping improve overall coordination of the relief and reconstruction
effort. Nevertheless, the influx of foreign emergency specialists and other
consultants into the disaster zones certainly imposed strains on local
administrative systems. Commenting on the phenomenon, UN Special
Envoy Bill Clinton (Clinton 2006a: 6) noted that problems in delivering
aid could sometimes be ‘compounded by a post-disaster influx of new
assistance providers who have little knowledge of the context in which
they are operating, including structures of inequality, chronic poverty, and
vulnerability.’
Many of the newcomers were experienced in the management of emer-
gency assistance in the field, but some were not. There was inevitably an
element of excessive enthusiasm on some occasions as relatively inexperi-
enced relief workers turned up in droves.

Another feature of the post-disaster coordination environment was the

establishment, often (probably usually) without any consultation with
local authorities in the region, of a large number of tsunami-related web-
sites. Many of these were established as parts of the existing websites of
large development or humanitarian agencies (such as the United Nations,
IFRC, World Bank, and so on). But many others were established in an ad
hoc way by NGOs or enthusiasts who hoped that the use of new web-based
technology would be helpful in responding to the disaster.
This phenomenon is of some interest. The Asian tsunami appears to
be the first megadisaster in a developing country which has prompted
an intense activity in the electronic website world. Hovanesian and Cox
(2007: 2–3) provided a summary of some of the main challenges of apply-
ing ICTs (information and communication technologies) in the disaster
environment following the tsunami:
The most important differentiating factor of an implementation of ICT solu-

tions in post-disaster situations in comparison with those in a normal environ-
ment is the timing of the deployment; solutions in post-disaster situations have
to be deployed in an extremely short period of time. . . . the environment can
grow increasingly more difficult as ad hoc structures and overseeing entities are
created for implementing and coordinating the reconstruction, while workflow
processes are adapted to the situation as the reconstruction is progressing. . . .
Across the tsunami-affected countries, over a thousand donor agencies and
implementing partners have been participating in online data sharing, directly
providing up-to-date information on the progress of their reconstruction works.
In the absence of information sharing during the initial rehabilitation phase, the
sheer number of organizations involved threatened to overwhelm the capacity
of the government to absorb such a large volume of information on aid.
No evaluation of the family of tsunami-related websites appears to have

been carried out. But several aspects of the activity are notable. One is that
it seems that there was a problem of sustainability because quite a few of the
websites were not well maintained. Within six months or so of the tsunami
disaster, perhaps one-third of the sites appeared to have become neglected.
Further, as time went on, even some of the main websites supported by
the major international organizations began to develop problems. For
example, by mid-2009 it appeared that the website established by the UN
to support the work of Bill Clinton as Special Envoy for Tsunami Relief
had been taken over by a commercial firm for sales distribution purposes.
Others were difficult to access or had been replaced by alternative websites
(sometimes containing the same data as the original sites, sometimes not).
On the other hand, some of the websites, especially those established by
some of the larger international donor agencies and international NGOs,
provided a great deal of information about the tsunami relief effort. While

many of the items carried on these websites were public relations materi-
als, many other items were substantial reports published by international
and national agencies and by NGOs.
It should also be noted that some of the websites were specifically
established for coordination purposes (Hovanesian and Cox 2007). The
UN-supported RAND (Recovery Aceh-Nias Database), for example,
was established to facilitate the improved reporting of expenditure by
donor agencies on tsunami-related activities.8 This RAND database, in
turn, supported a more broadly based ‘Tracking Tsunami Resources and
Results’ database which provided data from a number of tsunami-affected
countries.9 In addition, a very large number of documents relating to the
tsunami aid effort have been made available on the web. The major A
Ripple in Development? evaluation study of links between relief, rehabilita-
tion and development (LRRD) supported by SIDA (Brusset et al. 2009a)
was underpinned by the preparation of an extensive annotated bibliog-
raphy of which over 92 per cent of the documents cited were recorded as
having web links (Cosgrave et al. 2009: 14). Presumably the flow of this
remarkable amount of information contributed to better overall coordina-
tion because of the relative ease of access to reports and data about activi-
ties that different donors were concentrating on.
A third feature of the numerous coordination issues across the region
was the competition, and indeed open friction, sometimes evident between
different parts of the aid industry. One example is that of unexpected
tensions between organizations supporting foreign doctors and nurses
working in the field. Shortly after the relief effort had begun in Indonesia,
the New York Times carried a story (Perlez 2005) highlighting the work
done by physicians working in emergency conditions in Banda Aceh. The
report was sharply criticized by the Center for Nursing Advocacy (2005),
a US organization representing nurses. The Center argued that the story
demonstrated ‘physician-centric bias’ because:
the article ignored the work of nurses, and gave readers the impression that
only physicians were providing care of any significance in Aceh province, and
by implication, elsewhere in the tsunami disaster zone. . . . the Perlez piece failed
to note or explain the absence of local health workers or nurses generally in
Aceh. It simply focused on the exploits of foreign physicians as if it were self-
evident that only they mattered.
A frank exchange of views quickly followed. One of the physicians in the

Banda Aceh team issued a statement defending the New York Times story
as accurate. The Center for Nursing Advocacy, in turn, continued to insist
that the whole affair illustrated the way that contributions by nurses were
undervalued. This particular exchange between doctors and nurses is

perhaps not important in itself. However the incident serves to illustrate

the sorts of frictions which bubbled to the surface when teams of emer-
gency workers were attempting to deliver aid in the field under difficult
circumstances.
Finance
Issues of financial management also presented difficult challenges on the

supply side of aid delivery. As noted earlier, in overall terms the tsunami
aid effort was one of the largest single aid efforts ever supported by the
international community. But to view the aid effort in this way immedi-
ately gives rise to the question of whether it is best to consider the activity
as one project – or as many projects. Funds were provided in many differ-
ent ways, from national and international sources and through public and
private channels. These funds were in turn spent in many different ways in
accordance with many different administrative requirements.
The advantages and disadvantages of arrangements of this kind are
discussed in more detail in the country chapters below. However in many
cases, the management of the finances associated with project activities
posed three challenges: the establishment of effective financial controls
including checks against corruption; avoiding unreasonable delays in
spending; and ensuring that arrangements for the tracking of expenditure
and transparent accountability were satisfactory.
From the beginning of the tsunami aid effort, both international and
national agencies had considerable concerns about the need for reliable
financial control systems. These concerns were heightened by the focus
on risks of corruption in international aid programs in recent years as
well as the reputation of Indonesia as a corruption-prone country. The
Australian National Audit Office, for example, referred to these issues in
a report prepared in 2006 on the Australian aid program established to
assist Indonesia immediately after the tsunami (ANAO 2006: 66):
Fraud and corruption are recognized risks in many countries in which AusAID
works. This is the case in Indonesia, where corruption is reported to be a
widespread problem. . . . International development banks also report that
Indonesia’s procurement system is inherently weak. Problems include:
● collusion between bidders;
● supply of poor quality materials and equipment, insufficient quantities or
substitution of materials (eg., wood for steel); and
● requests for unjustified contract amendments.
Numerous other donors had similar concerns about programs in Indonesia

and elsewhere. In response, the governments of the main tsunami-affected

countries quickly acknowledged the need to put adequate safeguards

in place. Numerous meetings were held with donor agencies to discuss
arrangements. In Indonesia, for example, an International Conference
on Promoting Financial Accountability in Managing Funds Related to
Tsunami, Conflict and Other Disasters was held in April 2005 at which
Indonesian President Susilo Bambang Yudhoyono explained (ANAO
2006: 67):
I have declared my commitment in fighting against corruption as a national

movement in December 2004. We will press on as hard as we can in the fight
against corruption. We have registered encouraging progress in dealing with
corruption in this country. We are strongly determined and committed to
ensure that there will be no corrupt practices in the spending of these rehabilita-
tion and reconstruction funds.
As a result of these concerns of the international donor community, a

notable feature of the overall tsunami assistance effort across the region
was a focus on measures to minimize opportunities for corruption.
But there are trade-offs to be made in imposing stricter financial con-
trols. One disadvantage of stricter controls was that approvals to spend
funds were sometimes delayed. These delays, in turn, slowed the delivery
of aid in some programs. Donors sometimes justified the delays in the
delivery of aid by emphasizing the need for controls over the quality of
assistance. But stakeholders in the program – both contractors supplying
aid in the field and recipients of the aid – were nevertheless disappointed
when activities took longer to complete than expected.
The overall tracking of expenditures, and transparent accountability,
were other issues which financial managers needed to address. The indi-
cations from the very large number of individual program reports that
executing agencies have made publicly available are that these things were
generally managed well at the individual activity level. What has been
much more difficult to obtain is reliable aggregate data for the tsunami
assistance effort. These issues are discussed in more detail later in this
study. Chapter 3 shows that there are matters concerning the tracking of
expenditures and the transparency of accounting which the donor com-
munity might usefully address.
Response Stages
In all of the main tsunami-affected countries, the response to the disaster

passed through three stages – relief, rehabilitation, and reconstruction
(Figure 2.1). Although the division between the stages is not clear-cut,
it is useful to take note of the differences between them. For one thing,

the priorities that needed to be addressed and the role of different actors
changed as time went on. Another reason for distinguishing between the
stages is that the impact of the overall assistance program on local econo-
mies varied greatly over time. Many communities devastated by the tsunami
experienced, first, a collapse of almost all local economic activity and a
period of heavy dependence on emergency assistance in the period following
the tsunami (De Silva and Yamao 2007). Later, as large-scale rehabilitation
and reconstruction programs got underway, there was evidence of local
Dutch Disease effects (discussed below) as the prices of local non-tradable
goods (such as housing and some types of labour) rose markedly.
There is also another stage that needs to be considered. The transitional
period of a return back to longer-term stability for local communities
which occurs after assistance activities have largely been completed has
so far received little attention in discussions about the response to the
tsunami (Rice 2007). But as the main assistance programs come to an end,
local demand for many goods and services tends to fall away. When this
happens, regional policy makers are faced with the challenge of finding
ways to assist local economies adjust to a new, post-assistance, economic
environment. Discussing the transition to the new environment, the World
Bank (2009) observed that:
Growth in Aceh’s non-oil and gas economy declined sharply in 2008 as the
reconstruction effort winds down. . . . As many reconstruction actors (NGOs,
GoI) wind down or significantly scale down their operations in the province,
sectors linked to the reconstruction effort that had led growth in Aceh since
2005 registered low or negative growth.
The overall result of these various changes was particularly marked in

Aceh where the World Bank noted that ‘Aceh’s economy has suffered
tremendous shocks over the past few years.’
Cross-cutting Issues
International donors and national agencies agreed that a range of cross-

cutting issues needed to be addressed in the delivery of the post-tsunami
aid program.10 Of the wide range of cross-cutting issues which, in princi-
ple, might have been seen as needing attention, the main ones given prior-
ity in the post-tsunami assistance programs included peace-keeping issues,
gender, attention to children and aged persons, community participation,
environmental concerns, and the sustainability of the aid activities.
The incorporation of these cross-cutting issues into post-tsunami
assistance programs complicated the process of delivering aid. Indeed

Disaster – economic impact at various stages
Level of DISASTER
economic
activity RELIEF
REHABILITATION
RECONSTRUCTION
RETURN TO
NORMAL
time
PRE-DISASTER POST-DISASTER
Figure 2.1 Stages of response following a disaster
requirements on the part of some international agencies that attention to

particular cross-cutting issues be built into the project that they were sup-
porting amounted, in effect, to a form of conditionality. And requirements
of this kind inevitably touched, to some extent, on the question of to what
extent the quality of aid was important rather than the quantity or the
speed of delivery.
It is inevitable, for example, that the incorporation of cross-cutting
issues into program designs takes time and requires additional care. Often
specialist staff need to be recruited to provide sectoral advice. Projects may
need to be significantly changed to ensure that the key cross-cutting issues
receive appropriate attention. This is no bad thing, of course. Certainly
poorly designed projects should not be allowed to go ahead. But in prac-
tice an unavoidable consequence of adopting this approach was that
projects were somewhat delayed.
A number of European donors, especially, were concerned that there
should be a strong focus on peace-keeping and post-conflict programs.11
These programs were seen as important, especially, in Aceh and Sri Lanka,
where difficult and prolonged periods of regional civil conflict had taken a
heavy toll in the years preceding the tsunami (He and Reid 2004; Aspinall
2007). European peace-keeping negotiators had been actively promoting
discussions between protagonists in the period before the tsunami. They
took the view that in the terrible wake of the tsunami it was possible

that perhaps a window of opportunity might open up to promote peace

(Brusset 2009a: 37–40). They hoped that there might be an increased desire
amongst surviving communities to set aside differences and concentrate
on building peace in the post-tsunami environment.12 In the event, in both
Aceh and Sri Lanka there was an impetus towards peace in the period
following the tsunami. In Aceh, negotiations were successful and a peace
agreement was reached. In Sri Lanka, the truce between protagonists was
temporary because after a period of peace, fighting between forces of the
Government of Sri Lanka and the separatist Tamil Tigers resumed.
Another cross-cutting issue to which many international agencies gave
priority was the impact of tsunami recovery activities on women. A survey
by the Tsunami Evaluation Coalition around one year after the tsunami
recorded that the recovery and reconstruction program appeared to have
various negative effects on women. Scheper et al. (2006: 41) listed the fol-
lowing as key issues:
● Inflexibility in the humanitarian system which failed to make excep-

tions for the specific situations of affected women, particularly
female-headed households
● Insufficient protection in the IDP (internally displaced persons)
camps which made them unsafe for women and girls
● Insufficient international legal assistance with respect to land tenure,
inheritance and guardianship disputes, often complicated by tradi-
tional Shari’a law interpretations
● Loss of access to sustainable livelihoods and limited access to eco-
nomic recovery programs which appeared to have been particularly
pronounced for women
● Limited access to information because information channels had
tended to remain male-dominated, and
● Limited opportunities, capacity and leadership amongst women’s
grassroots and advocacy organizations which, in turn, hindered their
ability to influence mainstream relief and reconstruction activities.
Nowak and Caulfield (2008) survey the literature on gender issues and disas-
ters in considerable detail and also report on field surveys which they under-
took in India and Indonesia following the Asian tsunami. They emphasize
that ‘women and men experience, perceive, and respond to disasters in
different ways’. One main finding from literature surveys which they note is
that ‘Women and children are disproportionately affected by disasters . . .
Despite gender and gender relations being important organizing principles
in social arrangements and structures, humanitarian organizations fre-
quently ignore gender-specific issues in disaster management’ (2008: 6).

They also report that various authors are critical of the processes of
the delivery of humanitarian aid which create a situation where ‘disas-
ter management is often a male-dominated, top-down process, which
employs an authoritarian style’ (Nowak and Caulfield, 2008: 12). One of
their main conclusions (ibid.) is that ‘the culture and attitudes of humani-
tarian agencies need to change in order to achieve gender equity in relief
programmes’. Other field surveys of problems faced by women after the
tsunami (Oey-Gardiner 2005; Fulu 2007; IDLO and UNDP 2007) also
suggest that women often faced particular problems (legal restrictions on
land rights and inheritance, and domestic violence) to which aid agencies
tended to give low priority.
In addition, there were sometimes differences of views about environ-
mental priorities between the agencies who were providing aid and the
recipient communities. In Aceh, for example, some international environ-
mentalist groups were concerned that housing projects would encourage
illegal logging both in the province of Aceh and in the nearby province of
North Sumatra.13 UNEP urged that more attention be given to environ-
mental issues in the plans prepared for reconstruction in Aceh after the
tsunami (UNEP 2007). But survivors of the tsunami living in temporary
accommodation were less concerned about the problems caused by illegal
logging because they were eager to see housing projects completed as fast
as possible. They took the view, in any case, that illegal logging had long
been a problem in the area and that it was unreasonable for environmen-
tally inclined INGOs to use the leverage that aid programs provided to
delay them access to promised housing.
The issue of long-term sustainability of activities supported by assist-
ance programs was also a controversial issue. The major A Ripple in
Development? LRRD evaluation report prepared with the support of
SIDA and released in early 2009 discussed this matter in considerable
detail (Brusset et al. 2009a). The promotion of the broad sustainability of
activities supported by humanitarian assistance programs is not an issue
which the international aid community has learnt to deal with effectively.
It is true that the international aid community has given much attention
to challenges of sustainability in the context of environmental issues.
However, the global aid industry has found it much harder to ensure that
international aid activities, including humanitarian aid activities, are sus-
tainable in the broad sense of remaining viable once donor support stops.
When responding to megadisasters such as the Asian tsunami, the
international donor community tends to focus on priorities such as sup-
plying consumable items needed for immediate use or large-scale housing
or infrastructure projects. While the provision of items of this kind is
extremely helpful in responding to priorities in the wake of a disaster, it

is not always the case that the broader issues of long-term sustainability
receive attention within these types of programs. In fact, even five years
after the tsunami it is not clear how sustainable many of the projects sup-
ported by the large tsunami assistance program might be.
The long-term effectiveness of many of the larger projects will not
become clear, perhaps, until ten years after the tsunami disaster. And by
then, the donor community will have left. It will be up to the local com-
munities themselves in the tsunami-affected countries to tackle the difficult
issues of long-term sustainability of development in the wake of the disas-
ter. In the meantime, project reports prepared by units such as the World
Bank-supported Multilateral Donor Fund, which was established to help
promote development in Aceh, suggest that the sustainability of recon-
struction investments is likely to be a problem (Multi Donor Fund 2008).
Trade-offs in Delivery: Speed versus Quality
The issues of the physical delivery of assistance, financial management

and attention to cross-cutting issues discussed above are reflected in the
dilemma that most assistance agencies faced when providing aid following
the tsunami – whether to supply aid quickly, or whether to spend more
time ensuring that the quality of aid, however measured, was of a high
standard.
There are arguments for each approach. Those who emphasized the
need for speed pointed to the acute needs that local communities had in
the wake of the disaster. Following the tsunami in Asia, there was wide-
spread damage and destruction of many assets (infrastructure, buildings,
boats, crops). Because local economies collapsed, virtually all of the usual
daily income-earning opportunities disappeared as well. Many thousands
of tsunami survivors not only lost family members but were left destitute.
A further reason for supplying assistance quickly was that as time passed,
it became clear that the strong preference of the consumers of the aid
programs – the tsunami survivors – was that assistance be provided more
quickly.
However many of the agencies supplying aid – and especially interna-
tional agencies – were more cautious. They pointed to the problems which
arise when inappropriate types of aid are provided, of the risks of financial
mismanagement, and of the need to ensure that assistance programs were
properly designed. They also noted that unless the detailed procurement
and audit processes set down by their headquarter agencies were complied
with, embarrassing criticisms of their aid programs were likely to appear
in the media in donor countries. It was partly because of concerns of this
kind that a ‘build back better’ approach which emphasized quality rather

than speed was adopted by many aid providers in the communities devas-
tated by the Asian tsunami.
But there was another, broader reason why some members of the inter-
national aid community urged that a ‘build back better’ approach be
followed: a concern that in the rush (as some saw it) to deliver humanitar-
ian assistance quickly, longer-term development issues would tend to be
overlooked. This view was clearly represented, for example, in A Ripple
in Development, the report on LRRD issues released in 2009. A Ripple in
Development argued (Brusset et al. 2009b: 7) that humanitarian aid should
not be applied just towards immediate recovery, but towards making the
affected societies socio-economically stronger, more resilient to future risks.
Return to the pre-tsunami status quo was not, therefore, a benchmark of
success, since it did little to overcome development issues that made the region
so vulnerable in the first place.
This approach, it needs to be noted, sets a high bar in terms of standards

for the delivery of tsunami aid. It assumes (or at least hopes) that donors
will take a long-term point of view, that a complex range of cross-cutting
issues will be addressed, and that somehow the weak state and non-state
institutions which support government and governance in the tsunami-
affected countries will be able to provide good services once aid donors
leave the scene. The approach also implicitly reflected a longer-term time
horizon than tsunami-affected communities themselves often appeared to
prefer.
DEMAND SIDE ISSUES
It is appropriate for the purposes of this study to consider the recipients

of tsunami aid as the consumers of the assistance. But it should be borne
in mind that, as noted above, international aid programs often have a
Janus-like quality of being designed to respond to the interests of stake-
holders in both aid-recipient countries and in donor nations. Depending
on the political-economy framework within which the overall aid effort is
placed, the final consumers of tsunami aid also included the taxpayers who
paid for the provision of the goods and services supplied by the assistance
programs – that is, taxpayers in both donor countries and in the countries
affected by the tsunami.
However, since it is the outcome of the action in the field which is gener-
ally regarded as the best single measure of effectiveness of the aid effort,
the views of recipients cast important light on how the overall effort should
be evaluated. There is a very extensive literature on the views of people in

communities affected by the tsunami.14 It is clear that the speed of response

was one of the most important aspects of the aid program from the point
of view of recipients. And as noted above, agencies providing assistance
faced something of a dilemma in trying to respond, on one hand, to the
wishes of aid recipients but on the other hand, meeting the quality stand-
ards implied in the ‘build back better’ motto.
But speed was not the only thing that was important for aid-recipient
communities. Depending on who was consulted, issues such as the supply
of housing and the lack of livelihood opportunities were noted as matters
which aid recipients were concerned about. A survey conducted by the
Fritz Institute in October 2005, nine months after the tsunami, provided
an unusual insight into what local communities in the tsunami-affected
areas thought of the assistance that they had received (Fritz Institute
2005). Their views on the effectiveness of the support provided were quite
mixed. In terms of the immediate response to the disaster, local communi-
ties generally reported that the fastest assistance was from local organiza-
tions (Table 2.2). In the medium term, issues of shelter and severe loss of
income were rated of high importance (Box 2.2). However, as the country
surveys in later chapter show, the degree of overall satisfaction in the
aid-recipient communities varied considerably depending on local circum-
stances and how the delivery of assistance proceeded over time.
AID EFFECTIVENESS
It is not really possible to review the overall Asian tsunami aid effort
without, first, considering the question: how can we decide whether the
large assistance program was successful or not? Alternatively: what cri-
teria should be used to reach a judgement as to whether the tsunami aid
effort was effective?
To ask these questions is not to suggest that the provision of large scale
humanitarian assistance following the Asian tsunami was not worthwhile.
Rather, these issues need to be discussed so that the goals of the wide
variety of actors involved in the relief effort can be considered and so that
some criteria for judging the success of the aid effort can be suggested.
Further, the issue of the effectiveness of the tsunami aid program can
hardly be avoided. In recent years, the international donor community has
given a great deal of emphasis to the issue of effectiveness. In numerous
international meetings around the world, donors have constantly empha-
sized the need to define and measure the effectiveness of aid programs.
Dozens of reports have been commissioned on the subject, and hundreds
of studies have been published on various aspects of aid effectiveness.

Difficult, therefore, though it is to evaluate the overall effectiveness of a

major aid program encompassing the activities of a very large number of
actors across a number of countries, some effort to do so is needed.
Former US President Bill Clinton, in his role as UN Special Envoy for
Tsunami Recovery, speaking in Washington DC in 2006, drew attention
to the criteria that would form the basis for a review of NGO operations
in tsunami-affected areas (Clinton 2006b: 19):
● Accountability to the beneficiaries of assistance

● Enhanced local capacity of government institutions and the NGO
community in affected countries
● Ensuring high standards of professionalism in the field
● Communication and coordination among the NGO community
● Incorporating human rights principles into recovery operations.
This useful list points to various key issues which many observers argue
should be used as benchmarks to evaluate the performance not only
of NGOs, but of all agencies that delivered assistance during the 2004
tsunami aid program.
In addition, given the scope of the tsunami assistance effort, other
aspects of the effectiveness of activities need to be considered. The usual
preferred approach in trying to evaluate the effectiveness of aid is to, first,
define objectives, then establish measurable performance indicators, and
finally evaluate the aid activity against the agreed indicators. But this type
of approach is rarely followed in the provision of humanitarian assistance
following a major disaster. Rather, as noted earlier, in the initial stages
the urgent focus tends to be on getting the job done. And the culture of
concentrating strongly on the logistics of aid delivery, sometimes with
little concern for costs, is reinforced by the involvement of military, police,
and civil disaster personnel in the aid operations in the field. And once the
longer-term aid effort is underway, it is difficult to coordinate program-
wide approaches to issues of effectiveness.
It is, therefore, often not easy to arrive at firm judgements about the
effectiveness of humanitarian aid for three reasons:
● Different actors involved in the provision of assistance may have dif-

ferent objectives; moreover, these objectives are not always clear.
● Measurable performance indicators are rarely established, and data
collection against agreed indicators is often hard to evaluate.
● Judgements about effectiveness are often provided by donor and
other assistance agencies themselves; these tend to be subjective and
may be difficult to verify.

M2406 - JAYASURIYA.indd 32
Table 2.2 Recall about service providers by affected families (first 48 hours)
Rescue Burial Food Water Clothes Shelter Medical Counselling

% % % % % % care % %
Indonesia (N = 500, in the five most affected areas)(b)
Private individual 91 88 88 93 86 87 74 78
Government 5 2 6 4 4 8 10 3
International NGO 1 1 1 1 1 1 3 4
Local NGO 2 2 2 1 2 1 1 1
Religious orgns. 1 7 2 1 7 2 13 1
Corporate sector 0 0 0 0 0 0 0 0
32
Total(a) 100 100 100 100 100 100 100 100
(b)
Sri Lanka (N = 800, from 98 villages)
Government 8 11 4 9 3 17 34 6
Local NGO 8 10 10 9 8 12 13 13
Religious orgns. 1 8 16 15 15 24 9 22
Not aware 1 4 1 1 2 3 4 4
Total(a) 100 100 100 100 100 100 100 100
7/10/10 15:38:29
India (N = 1000, from 93 villages)(b)
Government 23 40 24 40 8 32 57 26
Local village community 47 24 26 18 20 20 1 7
Local NGO 3 2 11 10 15 9 7 19
Religious orgns. 5 5 17 12 9 11 5 15
33
Not aware 18 25 2 2 16 12 11 20
Total(a) 100 100 100 100 100 100 100 100
Notes:
(a) Not all columns add precisely to 100% due to sampling procedures and rounding errors. For details of methodology, see the Fritz Institute
report.
(b) N = number of respondents.
Source: Fritz Institute (2005).
7/10/10 15:38:29
BOX 2.2 AID DELIVERY AS SEEN BY TSUNAMI-

AFFECTED COMMUNITIES
1. Aid provided during the first 48 hours was overwhelmingly

local; citizens played a critical role.
In the recollections of the tsunami-affected people, the aid pro-
vided during the first 48 hours was mostly from private individuals
or the local community. In Indonesia, 91 per cent of the rescue
services were provided by local individuals.
2. Satisfaction with the services provided during the first 48

hours varied widely; at 60 days, satisfaction levels across
countries were more similar.
There was wide variation across countries in satisfaction with the
immediate rescue and relief services provided. Overall, beneficiar-
ies in India were most satisfied with the services provided in the first
48 hours. Their counterparts in Indonesia were the least satisfied.
3. Nine months after the tsunami, life was far from normal;
there had been sharp decreases in household income in all
affected areas.
Across the three countries, the proportion of losses in income
was greatest in Indonesia where an astounding 83 per cent lost
more than 50 per cent of their income. In Sri Lanka and India, 59
per cent and 47 per cent, respectively, of those surveyed reported
more than a 50 per cent drop in income.
4. Livelihood restoration programs did not get high satisfac-

tion scores.
In all three countries, multiple programs to restore livelihoods
were implemented. Overall, these programs were not well rated
by beneficiaries.
5. Permanent shelter was the most significant continuing

challenge.
The issue of permanent shelter continued to be mired in con-
troversy over a considerable period. Safety and land were key
issues. The great majority of affected families were still living in
camps or temporary shelters nine months after the disaster. This
hampered a return to normal lives and kept the disaster in the
forefront of the minds of those affected.

6. Efforts to restore shelter were recognized.

Beneficiaries recognized that efforts were being made to
restore shelter. Asked about the services supplied, beneficiaries
expressed the greatest satisfaction with international NGOs.
7. Psychosocial support, not widely provided, was seen as a

critical service.
Many aid providers supplied psychosocial support including
counselling. Services provided by international NGOs tended to
be rated the most highly.
8. Excellence in aid delivery was recognized.

In Indonesia, international NGOs were seen as the best aid pro-
viders. In Sri Lanka, several local NGOs were rated highly. In
India, the central and state governments were seen as respon-
sive, organized, and visible.
Source: Adapted from Fritz Institute report (2005).
Because of the nature of these difficulties it is perhaps useful to fore-

shadow here that even after surveying the information provided in the
country chapters below, as well as the wealth of detailed material provided
in other reports about the delivery of Asian tsunami aid, it will be difficult
to draw specific conclusions about the overall effectiveness of the tsunami
aid program. For one thing, many thousands of specific activities and
projects were implemented by a very large number of individual agencies
across a number of countries. Needless to say, some activities were widely
acknowledged to be very effective while others ran into problems. For
another thing, to some extent beauty is in the eye of the beholder. In the
absence of clear criteria, and given that much of the available data is hard
to sift through, different observers are likely to make different judgements.
Rather, therefore, than aiming to reach specific conclusions, it may be
helpful to bear a checklist of questions in mind:
● Delivery of assistance Was physical aid (food, clothing, medical

help, housing, livelihood assets, and in the longer-term, infrastruc-
ture) delivered in a timely and satisfactory manner?
● Cross-cutting issues Was appropriate attention paid to cross-
cutting issues (such as peace-keeping matters, gender and age, envi-
ronment, and social participation) agreed as needing priority?
● Finance Was the promised aid committed and disbursed in a
timely, transparent way? Were financial controls satisfactory?

● Coordination and administration Was the overall delivery of aid well

coordinated? Was there good agreement between agencies providing
assistance about the arrangements for the delivery of aid? Were the
systems established to encourage regular reporting effective?
● Non-humanitarian goals Were the non-humanitarian goals of
actors involved in the tsunami assistance program achieved?
● Sustainability Did the assistance provided contribute to the long-
term sustainability of social life and economic livelihoods in the
tsunami-affected communities?
● Community satisfaction What did the people living within the
tsunami-affected communities think about the aid programs? Were
recipients of assistance generally satisfied with the results of the
programs?
There are, of course, many other aspects of effectiveness which might be

considered as well. However views about the answers to these questions
will certainly assist in reaching a judgement about the broad effectiveness
of the overall tsunami assistance program. We return to consider these
issues in Chapter 7.
NOTES
1. For information on steps taken by individual countries in Asia, see the PreventionWeb
website, supported by the UN ISDR at: http://www.preventionweb.net/english/
countries/asia/, accessed on 15 August 2009.
2. Additional information about recent developments at the international level is at the
ISDR website (2009c). The ISDR 2009 Global Assessment Report on Disaster Risk
Reduction (2009a) also provides an extensive discussion of the issues. In addition, the
annual World Disaster Reports issued by the IFRC contain valuable reports on disaster
risk reduction policy; see, for example, IFRC 2009.
3. For a recent discussion of the Hyogo Framework of Action and of progress made in
implementing the framework, see ISDR (2009a: Chapter 5).
4. In Indonesia, for example, a new Disaster Management Law was approved in 2007
which was seen as creating several ‘fundamental shifts of paradigm’ (Triutomo 2008:
4).
5. The ADB has discussed the establishment of a structure of this kind (Marianti 2007:
19). See also Freeman et al. (2003).
6. See the extensive discussion of difficulties of this kind in implementing policy in
Indonesia in Triutomo (2008).
7. The Roman god Janus was usually depicted as having two faces looking in opposite
directions. He was the god of gates, doors and beginnings and endings, and thus looked
in each way at once.
8. The RAN database is at: http://rand.brr.go.id/RAND/, accessed 16 September 2009.
9. The regional Tracking Tsunami Resources and Results website is at http://tsunami
tracking.org/undprcb/index.jsp?sid=1&id=1&pid=1, accessed 16 September 2009.
10. Cross-cutting issues are matters seen as affecting the effectiveness of aid across many

activities and which should therefore be mainstreamed into the delivery of assistance
whenever possible.
11. There is a very substantial literature on these issues. For references to articles and
reports on such issues as civil war, military activities, reconciliation, safety, and
relations with dissident groups in the tsunami-affected countries, see Cosgrave et al.
(2009).
12. A useful summary of the background to attempts to broker peace in Aceh in the period
before the tsunami is in a special edition of Asian Ethnicity published in October 2004.
See, especially, the survey of the issues by He and Reid (2004).
13. Illegal logging is common in Indonesia. Tacconi (2007) discusses the issues in detail.
For a detailed survey of illegal logging in North Sumatra in the regions close to Aceh,
see McCarthy (2007).
14. See the numerous references in Cosgrave et al. (2009) indexed under the headings of
community, information, and local.
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McCarthy, John F. (2007), ‘Turning in circles: district governance, illegal logging

and environmental decline in Sumatra, Indonesia’, in Luca Tacconi (ed.),
Illegal Logging: Law Enforcement, Livelihoods and the Timber Trade, London:
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Tsunami India and Aceh, Working paper no. 104, Singapore: Asia Research
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stricken Aceh and transition to a rapidly growing sustainable economy’,
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Response on Local and National Capacities: Indonesia Country Report (Aceh and
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Timber Trade, London: Earthscan.
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implementation of the Hyogo Framework for Action’, http://www.prevention
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20090701013738 / Rendered / PDF / 491870NEWS0P111june091english1final.pdf,

3. The matter of money
INTRODUCTION
This chapter considers matters relating to the financial flows associated
with the Asian tsunami. Some main issues concerning both the revenue
and expenditure sides of the financial flows are discussed.
There is little in this chapter that will surprise those with experience in
the delivery of disaster relief in developing countries. It is in the nature of
large-scale disaster-related emergencies in developing countries that coor-
dination is difficult. However, the efficient management of financial flows
is a key part of any effective response. In the midst of disasters, it is often
difficult to manage financial issues well. Former US president Bill Clinton
in his capacity as UN Special Envoy for Tsunami Recovery summed up
some of the key problems when he said (Clinton 2006: 13):
Tracking financial flows in recovery efforts is notoriously difficult, largely

because most financial reporting is voluntary and funding comes from many
sources. The tsunami experience has not been different in this regard. In
Thailand, Maldives, Sri Lanka, and Aceh, governments established aid man-
agement platforms to provide an online vehicle for a comprehensive inventory
of projects, financial commitments, and disbursements. In general, such data-
bases could play a crucial role in filling the longstanding gap on accurate finan-
cial tracking, but to do so, they need to come online very early in a recovery
effort, enjoy wide support from all the organizations involved in the effort, and
be tied more directly to the needs . . .
Against this background, the central questions addressed in this chapter

are, in principle, relatively straightforward. They are:
● How much money was provided by donors and others in response

to the disaster?
● How was the money used?
● What are the main lessons to be drawn about the financial aspects of
the response to the tsunami?
But as we shall see, although the questions are straightforward, the

answers are not. It is not easy to obtain details of what overall aid flows
were promised by donors and how much was provided. While many
40

The matter of money 41
individual agencies and NGOs provided detailed financial reports of their

activities, many did not. And any discussion of the way that aid money
was used must necessarily try to consider aggregate data relating to both
the quantity and the quality of the activities paid for by national govern-
ments, international donors, NGOs and others. But five years after the
tsunami, it remains extremely difficult to obtain a comprehensive picture
of the financial flows associated with the tsunami aid effort.
THE INITIAL RESPONSE
For a range of reasons the immediate public response to the 2004 Asian
tsunami, both within the affected countries and across the international
community, was overwhelming. The international media provided intense
coverage of the impact of the disaster and NGOs in many countries
quickly launched appeals for funds to assist survivors.
The initial response of governments in some rich donor nations in
the first few days after the tsunami was tentative. This caution perhaps
reflected a desire to wait for detailed reports from the field to arrive before
announcing large-scale aid programs. However public pressure quickly led
leaders in donor countries to announce comprehensive aid packages to help
tsunami survivors. The result of this combined support from both govern-
ments and the public was that in terms of the amounts of money usually
raised for international disaster appeals, there was a strong response and
the tsunami international assistance effort was relatively well funded.
The headline figures that are frequently mentioned as approximate
totals of financial support provided by the international community
in response to the tsunami disaster are in the US$13–14 billion range.
Because these amounts were large when compared to the sums usually
raised in response to many other international appeals, the sums attracted
much comment. The generosity of donors in rich countries, and especially
the public response, was widely remarked upon. Nevertheless, on closer
examination, many of the financial references to ‘aid’ or ‘assistance’ are
rather vague (Appendix 3A.1). It is useful, therefore, to examine the
various estimates of financial flows in more detail. This needs to be done so
as to put the tsunami relief effort into context and to obtain a meaningful
sense of magnitudes.
Contributions: Mobilization of Funds
The first problem in evaluating the financial situation is that there is no

single reliable and comprehensive source of data. Different sources provide

different estimates. Further, funds were provided through numerous differ-

ent channels and through a very large number of separate accounts (Figure
3.1). The result is that it is not easy to reconcile the different estimates.
The single most carefully prepared set of overall estimates for the early
period appears to be the study by the Tsunami Evaluation Coalition (TEC)
issued in July 2006 (Flint and Goyder 2006).1 The TEC study reported
that around US$14 billion was pledged by international donors and a
minimum of another US$3.5 billion of financial support was estimated as
forthcoming from domestic sources in the affected countries, making up a
total of around US$17.5 billion (Table 3.1).2 However, as Flint and Goyder
observe, these figures were no more than broad estimates.3 Really, to be
used for meaningful comparisons with international aid flows as usually
measured, they would best be adjusted in a range of ways.4
Information on financial flows shows that numerous donor countries
provided assistance. Almost half of the total amount was provided directly
to Indonesia (Table 3.2). There was notable support from some Asia-
Pacific regional donor countries supplemented by important flows from
European Union institutions, the United States, and European as well as
other bilateral donor nations. Other aspects of the pledges provided by the
international community included strong support from the major multi-
lateral development banks (World Bank and Asian Development Bank)
as well as from the Islamic Development Bank.
Terms of Assistance
As far as the terms of aid were concerned, the overall figures shown in
Tables 3.1 and 3.2 need to be considered from the point of view of three
main characteristics – timing, type of funding (grants or loans), and condi-
tionality. But an accurate overview of the funding picture in terms of these
characteristics is hard to obtain. Some part of the total funding (probably
small) was provided immediately in the form of grants with few strings
attached; a larger amount appears to have been offered with various con-
ditions attached in a mixture of grant and loan terms over an uncertain
period.
Information about the time period for which assistance was being
offered, for example, is hard to compile. In spite of the uncertainty, what is
clear is that the time periods for which the funds were offered varied widely.
In many cases donors were prepared – if possible, and consistent with the
conditions that were attached to the provision of aid – to disburse funds
quickly. But in other cases the bulk of funding was evidently intended to
be spent over longer periods so that the immediate assistance provided
was limited. The vagueness on this matter is significant for a number of

reasons. For one thing, the immediate provision of funding is, in financial
terms, more valuable than the promise of the provision of support at some
distant time in the future. For another, it is helpful to have some idea of
the timing of the supply of funds in order to be able to make judgements
about the likely amount of additionality.
The financial terms on which assistance was offered also appear to
have varied widely. Most assistance – it is hard to know precisely how
much – was provided in grant form, sometimes in cash and sometimes in
kind. The rest was provided in loans of varying kinds, mostly apparently
as soft loans on below-market terms. In principle, it would be useful to
convert these various types of loans into net ODA (official development
assistance) flows to allow for more meaningful comparisons to be made
between them.
Similarly, conditionalities set down by donors appear to have varied
widely. In some cases, onerous procurement conditions were attached to
the provision of aid. In other cases, the preferred reporting requirements
set out by different donor bodies were difficult for recipient agencies to
meet. And in yet other cases, donors looked for partnership commitments
from national institutions which, under the emergency conditions of the
day, placed a heavy load on an already overburdened local administrative
system.
The overall effect of this kaleidoscope set of arrangements as far as the
terms of aid is concerned is that it is very difficult to compare the bewil-
dering variety of apples and pears of different sizes which made up the
estimated total of US$14 billion of international assistance. Telford and
Cosgrave (2007a: 4) observe that ‘financial tracking was incapable of pre-
senting a comprehensive, accurate and up-to-date picture of funding at any
stage’. And to add to the complications, there are two further factors which
need to be considered in attempting to arrive at some judgement about the
total flow of aid: the size of other flows of assistance, and the question of to
what extent the tsunami aid flows were really additional (that is, additional
to the aid flows which donors could have been expected to provide to the
tsunami-affected countries in the normal course of events)?
Other Assistance Flows
The data in Tables 3.1 and 3.2 understate the total amounts of assistance
provided, probably significantly, because of lack of adequate data relating
to various local contributions. First, national governments in the tsunami-
affected countries provided very considerable resources towards the relief
effort. A minimum estimate of the value of this assistance is set by the
TEC at US$3.4 billion (Table 3.1). However, the true amount is probably

Gov. Foreign Multilateral

Donors NGOs Companies Communities
of Indonesia govts organizations
Intermediate
Multi donor fund/

agencies
Multilateral org. Companies NGOs

Recipients/Implementors
Gov. of Indonesia NGOs
Central GOI Aceh

Ministries local gov.
BRR
Relief, Rehabilitation & Reconstruction Activities in Aceh and Nias
Source: Adapted from Nasution (2009).
Figure 3.1 Flow of tsunami-related aid in Indonesia
considerably more. Second, anecdotal evidence suggests that significant

amounts of private remittances were sent directly, both from overseas and
from within each of the countries, to families and communities affected
by the tsunami. Third, and usually very important, is the value in kind of
local self-help assistance provided by local communities themselves. It is
usual, in many aid budgets, to estimate a value of the assistance provided
in kind and to show this in the overall aid budget. A proper measure of
resource flows should therefore include an estimate of the value of these
local contributions.
There is no reliable way of measuring the amounts of assistance pro-
vided in these ways. However the anecdotal evidence is that the amounts
were sizeable. In particular, numerous reports suggest that although local
self-help assistance is often unrecorded, it is in fact immediate, large, and
effective. If the individuals and community groups involved in these efforts
had a stronger voice in the national and international media, their efforts
would probably be far more widely recognized.
Additionality
The headline announcements of aid for tsunami-affected countries were

impressive. However, to what extent were these flows genuinely additional
in the sense that they represented assistance over and above the flows

Table 3.1 Overall estimates of tsunami funding
Source of funds US$ million

International sources
Governments 6 481
Pledged by DAC donor governments* 5 888
Pledged by non-DAC governments 593
Private donations 5 490
Private donations to NGOs 3 214
Private donations to UN agencies 494
Private donations to Red Cross/Crescent 1 783
Pledges by multilateral banks (loans) 2 095
Private remittances n.a.
Other private donations n.a.
Total identifiable funds (international sources) 14 067
National sources
Affected governments (minimum estimate) 3 400
Private donations in affected countries 190
(minimum estimate)
Affected population n.a.
Total funds (all identifiable sources) 17 657
Note: * DAC governments are the donor governments which are represented on the
OECD’s Development Assistance Committee.
Source: Flint and Goyder (2006: 15).
which might otherwise have been expected to occur in the absence of the
tsunami disaster? There is no easy answer to this question. It calls for
information about hypothetical aid flows. Nevertheless, the question is an
important one. It reminds us that at least some of the tsunami aid reflects,
in effect, a diversion of aid which probably would have occurred under
normal circumstances into the tsunami-affected countries. Donor coun-
tries are generally not eager to discuss such issues; recipient countries, on
the other hand, are generally quite aware of them.
Extremely rough indications of additionality can be obtained by esti-
mating the difference between, first, the likely amount of aid which might
have been provided in the absence of the tsunami, and second, the likely
flow of tsunami aid. Needless to say, estimates of both of these flows are

Table 3.2 Donor funding for tsunami by donor and recipient (US$
million)
Donor Regional India Indonesia Maldives Sri Lanka Total

Asia-Pacific regional governments
Australia 46 – 760 – 7 814
Japan 252 – 250 20 175 697
PRC 59 – – 2 318 379
Republic of 6 – 15 – 33 54
Korea
Non-regional governments
EU/ECHO/EIB 186 – 500 18 208 912
United States 294 – 400 10 65 788
Germany 105 – 500 – 110 715
Canada 104 – 173 – 84 361
France 29 – 150 – 104 283
United Kingdom 134 – 71 – – 205
Norway 83 – 84 – 19 186
Netherlands 43 – 100 10 25 178
Kuwait 30 – 40 10 20 100
Italy 27 – – – 72 99
Spain 7 – 25 – 62 95
Estonia 88 – – – – 88
Switzerland 27 – 50 – 9 86
Sweden 41 – – – 11 51
Denmark 38 – – – 8 46
Subtotal of governments 6 137
ADB – 200 386 24 157 766
World Bank – 529 64 14 150 757
Islamic DB – – 446 1 – 447
IMF – – – 6 158 164
IFAD 2 30 35 5 18 90
Subtotal of multilateral banks 2 224
TOTALS 1 602 759 4 049 119 1 813 8 360
% 19 9 48 1 22 100
Source: UN, Office of Special Envoy: http://www.tsunamispecialenvoy.org, accessed 15

November 2007.

highly speculative. Nevertheless, the exercise is instructive because of the

light it throws on the impact of the tsunami on aid flows.
A rough estimate of the possible distribution of tsunami aid flows is
shown in the second line of Table 3.3. It is assumed, for example, that 20
per cent of the US$14 billion was spent in 2005 and that another 20 per cent
was spent in 2006. The resulting total expenditure flow for the seven-year
period to 2011 of US$14 billion is shown in the third line. But as against
this flow (which is a mixture of loans and grants and is therefore not net
ODA), it needs to be borne in mind that in the absence of the tsunami the
affected countries would have received flows of perhaps US$1.5 billion
in net ODA per year or around US$10.5 billion over a seven-year period
(compared with US$14 billion for the tsunami flows).
What do these rough estimates tell us about additionality? Perhaps the
main thing that the data illustrate is the rough limits of minimum and
maximum likely aid flows to the main tsunami-affected countries over
the seven-year period 2005–11 under alternative scenarios. Under a full-
additionality scenario, total assistance flows might be expected to reach
around US$24.5 billion over the seven-year period. However, under a
no-additionality scenario, assistance flows would only amount to around
US$16 billion. The latter scenario, in turn, would imply that what might
be called the ‘true additionality’ of tsunami aid was around US$3.5 billion.
And these flows, it needs to be recalled, were apparently a mixture of
loans and grants, the true value of which was rather less than the generally
accepted measure of ‘foreign aid’ (which is net ODA).
Financial Flows
Weighing up all of these factors, it is very difficult to reach firm conclu-

sions about the real value of the total foreign aid provided. It is certainly
not clear what the value of true foreign aid (in net ODA terms) was or how
much was really additional.
Some might wonder whether worrying about all of this is like counting
angels on the point of a needle. Surely the main point is that generous
amounts of aid were provided in response to the tsunami disaster? Surely
attempts to measure the details are just accounting gimmicks? But this,
precisely, is the point: magnitudes are important. The meaningful measure-
ment of financial flows is needed. All actors in the public policy arena need
to have a sense of relevant magnitudes. And the worrying fact is that when
the commitments of donor agencies of all kinds (international, national,
official, and non-government) are examined, it is very hard to know what
they mean. Amartya Sen (2005) has spoken of the ‘celebration of the out-
burst of human sympathy’ in the aftermath of the tsunami. But to what

extent the outburst of human sympathy was reflected in the provision of

financial resources is very hard to determine.
SPENDING: USE OF FUNDS
Expenditure issues are sometimes seen as being at the dull end of aid deliv-
ery work. Dull or not, they are central to issues of effective aid delivery.
And the devil is in the detail. It is in the detail of the day-to-day delivery
of aid that many of the real difficulties in implementation lie. Issues of key
interest in the delivery of tsunami aid relate to both quantity and quality.
More specifically, it is useful to consider: how quickly was the money
spent? And was the money spent well?
In addressing these questions it needs to be borne in mind that the
appropriate patterns of spending vary considerably depending on the
phase of the response to an emergency. In the early relief stage during
the first days and weeks of a disaster management cycle (Carter 1991),
major expenditures on items such as food and temporary shelter are gen-
erally appropriate. Later, the emphasis often shifts to housing and social
support such as education for children. Still later, major infrastructure
spending is likely to gather pace (Figures 2.1 and 4.4).
Quantity
While it is difficult to obtain an accurate picture of the mobilization of

funds for tsunami assistance, it is even more difficult to track data on
spending. The Tsunami Evaluation Coalition report referred to earlier
provides useful information on the situation during the period up to the
end of September 2005. More recent estimates for Indonesia to early 2009
are provided on the World Bank Indonesia tsunami website (World Bank
2009). TEC estimates suggest that disbursements of promised funds had
reached slightly over 30 per cent of pledges at that time. But this, at best,
is only indicative of spending levels. The TEC report (Flint and Goyder
2006: 16) notes that ‘disbursement by a donor does not necessarily mean
that the funds have been spent’. Funds are generally recorded as disbursed
when they are transferred into the bank account of an implementing
agency and so ‘there is little information on how much has actually been
spent’.
Audit reports from the US and Australia on the use of tsunami funds
provide thoughtful summaries of the practical challenges in the field in
implementing spending programs. These reports are a valuable supple-
ment to the TEC information. In the case of the US, in May 2005 Congress

Table 3.3 Rough estimates of additionality, 2005–11
2005 2006 2007 2008 2009 2010 2011 Total

Normal aid (a) $ bn 1.5 1.5 1.5 1.5 1.5 1.5 1.5 10.5
flow
Tsunami aid flow % 20 20 20 20 10 5 5 100
$ bn 2.8 2.8 2.8 2.8 1.4 0.7 0.7 14.0
Additionality (b) Max $ 2.8 2.8 2.8 2.8 1.4 0.7 0.7 14.0
(c) Min $ 1.3 1.3 1.3 1.3 20.1 20.8 20.8 3.5
Total aid (including
tsunami aid)
(b) Max $ 4.3 4.3 4.3 4.3 2.9 2.2 2.2 24.5
(c) Min $ 2.8 2.8 2.8 2.8 1.5 1.5 1.5 15.7
Notes:
(a) The average net ODA flow to Indonesia and Sri Lanka combined for 2002–04 was
approximately US$1.5 billion (OECD data).
(b) Maximum additionality assumes that the total amount of traditional aid flows continue
to be provided in addition to the tsunami aid pledges.
(c) Minimum additionality assumes that all tsunami pledges are met by reducing aid which
would, in the absence of the tsunami, have been provided for other activities. It is also
assumed (for 2009 to 2011) that nominal aid flows are never actually reduced below
normal levels.
Source: Authors’ calculations.
appropriated US$908 million for relief and reconstruction. A summary of

progress to early 2006 from the US Government Accountability Office
(USGAO 2006) is reflected in Table 3.4. The pattern of spending in the
table, which appears to be similar to patterns of spending by some other
major bilateral donors, sheds useful light on the way that post-tsunami
aid activities were being approached. While emergency relief funds had
been spent quickly, funds earmarked for long-term reconstruction activi-
ties were being drawn down much more slowly. Out of a total of over
US$430 million allocated to reconstruction work in Indonesia and Sri
Lanka, more than one year after the tsunami less than 3 per cent had been
expended.
In the case of the Australian assistance program, the Australian govern-
ment, responding quickly to the tsunami disaster in early January 2005,
announced a large A$1 billion (approximately US$800 million) contribu-
tion to a newly formed Australia–Indonesia Partnership for Reconstruction
and Development (AIPRD). A report from the Australian National Audit
Office in June 2006 provided a preliminary assessment of the framework

established to manage the AIPRD rather than of the management of the

program itself (Australian Government 2006). Nevertheless, the report
canvassed some of the major issues likely to emerge in spending significant
amounts of money across Indonesia.
Taken together, these two audit reports, along with many other reports
about progress in spending tsunami monies, point to a range of well-
known challenges.
These include the following:
● The need for proper controls, including risk management controls,

over contract and tendering arrangements for the procurement of
goods and services.
● The additional pressures which tsunami-related programs place
on already over-burdened administrative systems in the tsunami-
affected countries.
● The high probability that final costs of construction programs
would exceed initial estimates by considerable amounts because of
the escalation of local construction costs in tsunami-affected areas.
● Working in regions with long-standing civil conflicts.
● Coordinating activities with host governments and with non-
government organizations.
● Ensuring that the focus on tsunami-related programs does not
hamper other, non-tsunami, development programs.
Table 3.4 US tsunami response: summary of progress to early 2006
Item US$ mil. Comment

Emergency relief 327 For immediate needs; mainly
completed by end 2005
Long-term reconstruction
Indonesia 349 US$9 mil. (3%) expended as of 31
January 2006
Sri Lanka 85 US$2 mil. (2%) expended as of 31
January 2006
Other countries and 62
regional
Total long-term 496 Rising prices are expected to
increase project construction costs
Other 85
Total 908
Source: USGAO (2006).

In addition to these challenges there was a growing reluctance, much

discussed in Indonesia in recent years, on the part of public officials being
prepared to approve any spending on anything whenever there were any
doubts at all about the legality of doing so.5 Given the weaknesses of the
legal system in Indonesia, as well as the lack of clarity which often exists
in official regulations, a highly risk-averse approach to approvals of public
expenditures meant that spending plans often got badly delayed.
Against this background it is hardly surprising that spending in the
first nine months after the tsunami appears to have been around 30 per
cent of total planned expenditures. A little over three years later, by early
2009 according to World Bank data (World Bank 2009), disbursements in
Indonesia reportedly climbed to around 62 per cent of original commit-
ments.6 However, overall estimates of spending do not seem to exist. Some
rough estimate of the overall situation can therefore perhaps be obtained
by assuming that patterns for total spending in all the tsunami-affected
countries reflected spending patterns in Indonesia. Disbursements of aid
in Indonesia at the end of 2007, three years after the tsunami, appear to
have reached the relatively modest figure of 55 per cent of original com-
mitments (Table 3.5). If a similar spending pattern applied to the total of
around US$18 billion of original commitments by all donors in all coun-
tries, then no more than US$9.9 billion was apparently disbursed by the
end of 2007.
At first glance, these figures might seem rather low. Are they unreason-
ably low? Did the expenditure systems perhaps fail to facilitate a timely
flow of resources to tsunami-affected communities? What can be said
about these issues?
On one hand, measured against some of the expectations that the early
publicity about large-scale assistance programs encouraged, the rate of
spending was seen by some as disappointing. Certainly there was evidence
of dissatisfaction from some stakeholders. There were media reports of
complaints from affected people and sometimes incidents of demonstra-
tions. On the other hand, it is inevitable that longer term reconstruction
programs such as road-building take time to implement.
To some extent, the priority to be given to immediate relief and humani-
tarian needs has to be balanced against the importance of longer term
development programs. In terms of immediate needs, initial evaluation
reports clearly pointed to problems. But in terms of longer term programs,
it is hardly surprising that delays occurred for all the well-known sorts of
reasons that tend to cause delays in such development programs.
Perhaps the main thing that can be said is that spending was not especially
rapid. Some observers argue that too many activities took too long to get
underway. Others argue that quality was more important than speed and

Table 3.5 Estimates of tsunami spending flows to end 2007
Original Allocated Disbursed

commitments (end 2007) (end 2007)
US$ bn % US$ bn % US$ bn %
Indonesia
Official donors 3.0 100 2.3 77 1.3 43
NGOs 2.1 100 1.9 90 1.2 57
GoI 2.6 100 2.6 100 1.7 65
Total (Indonesia) 7.7 100 6.8 88 4.2 55
All tsunami-affected countries (a)

Official donors 7.0 100 5.3 77 3.1 43
NGOs 4.9 100 4.4 90 2.8 57
National 6.1 100 6.0 100 4.0 65
governments
Total (all countries) 18.0 100 15.8 88 9.9 55
Note: (a) Data for all tsunami-affected countries is calculated by assuming that the
ratios for each category of the Indonesian data are applicable to the commitments for all
countries of approximately US$18 billion.
Source: Indonesia data is from ADB (2008). Data for All countries shows authors’
calculations.
quantity. Whatever the different views on these issues, it is certainly true

that spending systems which rely on cumbersome contract-based procure-
ment arrangements are not suited to the fast provision of disaster assist-
ance. If a main goal of disaster relief is to reach people quickly, revisions to
the bureaucratic ways in which much relief aid is provided are needed.
Quality
Two main issues concerning quality need to be considered. These are, first,
the expenditure choices that were made in the delivery of tsunami aid, and
second, the quality of the process (in terms of administration, controls
over procurement, and so on).
The indications are that, as is so often the case during emergency situ-
ations, the overall patterns of donor spending reflected a combination of
supply side and demand side factors. On one hand, donors who were
trying to respond quickly sometimes supplied goods or prepared programs
too hurriedly. When this is done, mistakes can be made. One AusAID
survey (Commonwealth of Australia 2007: 10) noted that

One of the important lessons from the 2004 Indian Ocean tsunami and other
disasters is that it is not a good idea to donate second-hand clothing. . . . many
of the second-hand clothes were culturally unacceptable . . . Relief supplies need
to be appropriate to the conditions and needs of disaster survivors. That is why
cash is usually the best form of donation – money can be spent quickly on the
most urgently needed items purchased locally. This is quicker and cheaper than
transporting goods from other countries and can also provide a much-needed
boost to local retail outlets.
On the other hand, because of problems of coordination, communications,

and lack of strong representation, local communities sometimes found it
difficult to identify their needs effectively at short notice.
In the immediate wake of the disaster, funds appear to have been gener-
ally well spent. In Sri Lanka, for example (Jayasuriya et al. 2006: 10):
While there were hiccups and some amount of confusion in organizing relief,
for a country that had not previously experienced such a disaster, Sri Lankan
institutions responded reasonably well. Essential medical aid, emergency food
and other relief supplies were mobilized within a day. Temporary shelter was
provided to the displaced in schools, other public and religious buildings, and
tents.
As against this, some observers commented on problems, including those

stemming from the actions of international agencies and NGOs. For
example, Batha (2005) observed that ‘the vast amount of funding meant
aid agencies could afford to hire their own helicopters and boats and make
individual assessments and distribution arrangements rather than co-
ordinate with one another and through the United Nations’.
Nevertheless, many anecdotal reports about the responses in Indonesia,
Sri Lanka and Thailand concluded that while inevitable mistakes occurred,
the overall delivery of emergency aid in the first stages of response to the
disaster was generally effective. In the longer term, expenditure priorities
shifted to relief and rehabilitation schemes such as housing and programs
to support local commercial activity (provision of assets such as fishing
boats, microfinance programs).
What can be said about the quality of the process? From the earliest
stages of the international response to the tsunami disaster, donors indi-
cated the quality of aid delivery was a matter of considerable concern.
There are several reasons for this.
First, the quality of international aid has attracted much attention in the
international donor community in recent years. Increasingly, international
conferences of donors and reports sponsored by the donor community
have emphasized the importance of improving the impact of aid. Indeed,
the need to improve the effectiveness of aid has become something of a

mantra across the international donor community. Thus checks and bal-
ances of various kinds have been introduced into many international aid
programs across the world with the aim of increasing aid effectiveness. The
provision of large programs of tsunami aid in Asia took place against this
background of heightened international concern about quality issues.
Second, Indonesia is regarded as a corruption-prone country so the
topic of controls over tsunami expenditures assumed considerable impor-
tance from a very early stage in the tsunami aid program there. Indonesian
leaders quickly acknowledged the need to address this issue. Among other
measures, steps were taken to introduce improved auditing controls and
the Badan Rekonstruksi dan Rehabilitasi (BRR) was established. Similarly,
in Sri Lanka the issue of proper controls over expenditures was seen as
important. Significant lapses in the administration of funds were noted in
an Auditor General’s Department report in September 2005 (Jayasuriya
et al. 2006: 52).
Despite these and other steps, some international donors remained suffi-
ciently concerned about expenditure procedures as to be reluctant to share
authority over spending programs. In some cases this reluctance, which
reflects the legal and auditing requirements which donor governments
have set for bilateral agencies, exacerbated problems of coordination
between spending agencies in the field.
SOME OVERALL CONSIDERATIONS
A number of issues arise out of this overview of the financial issues associ-
ated with the response to the tsunami disaster in Asia.
First, there was often a lack of transparency about the arrangements
(both volume and conditions) on which promised assistance was to be
provided. This is true for both national and international agencies, and
for official and non-government bodies. Agencies tended to report on the
assistance provided in a range of ways – in different currencies, for differ-
ent (or undefined) time periods, and they tend to group both grants and
loans (of varying terms) together. Moreover, the definitions used by differ-
ent agencies for such things as ‘aid’ and ‘assistance’ varied widely. To take
just one example, the UN Office for the Coordination of Humanitarian
Affairs (OCHA) made a useful effort to maintain updated information
on tsunami relief aid (http://www.reliefweb.int) but was obliged to note
that ‘In their original pledges, donors who broke pledges down between
humanitarian and reconstruction aid applied their own definitions of
humanitarian aid (also called “immediate relief” or “emergency” by some
donors).’

Further, the systems for recording and tracking assistance were fre-
quently unsatisfactory. The reporting of flows was often incomplete and
delayed. Important attempts were made, it should be noted, to improve
the recording systems (Ramkumar 2006; Hovanesian and Cox 2007).
In a determined effort to deal with the daunting problem of highly con-
fused and unreliable financial data, the United Nations Development
Programme (UNDP) supported the development of a regional Donor
Assistance Database (DAD). It was hoped that the DAD would be able
to provide current data about financial flows for all of the main countries
affected by the tsunami.7 In Indonesia, for example, the main agencies
involved in tsunami relief were asked to register with the local office of the
national coordination agency, the BRR, to set up an account on the local
DAD known as RAND (Recovery Aceh-Nias Database) and to regularly
update data on funds committed and disbursed (TGLL 2009: 63). As one
local staff member of the United Nations put it, ‘We needed something
that was very transparent so anyone in the world, including mums and
dads in London, could use it.’8
But in practice, mums and dads in London could not use the RAND.
They could not really use any of the other DADs established by the UNDP
either. And most other people would have found the DADs very difficult to
use as well. The basic problem was that any system of this kind was depend-
ent on the willingness and capacity of a myriad aid agencies to cooperate
by regularly providing accurate financial information. This did not happen.
The TGLL study summarized the outcome as follows (2009: 63)
The database faced numerous challenges and fierce criticism. Indeed, one of
the main criticisms, from the World Bank and NGOs, amongst others, was
that because each agency was responsible for updating its own entries, inac-
curate data or misrepresentations of activities might be included. In the begin-
ning, only about 33 percent of organizations on RAND were updating their
accounts. Data entry errors and other factors cost RAND credibility for pro-
viding a timely, accurate picture; in 2006, for example, it did not capture even
half of recovery efforts in Aceh and Nias.
Even several years later, in 2009, the DADs were difficult to use and con-
tained data that appeared to be quite unreliable.9
The result is that at best, only an incomplete picture of flows of tsunami
aid is available. In a survey of disaster-related aid conducted in 2007, a
task force established by INTOSAI (the International Organization of
Supreme Audit Institutions) made the following observations (INTOSAI
2007: 6):
Donors and recipients want trust, but want assurance, that aid that is provided
is well spent in terms of regularity, efficiency and effectiveness. For this reason

information is needed on planning of aid projects, how the aid is spent, the
implementation of projects, and the results that were achieved. The basis of
this should be an information structure, an audit trail, that makes it possible
to follow aid from source to destination and to capture the results of the aid
provided. The Task Force has studied the flows of Tsunami-related aid and has
come to the conclusion, as have others like the Tsunami Evaluation Coalition
and the UN Board of Auditors, that such an information structure is lacking.
As a result, there is no transparency and accountability in place to follow aid
from source to destination. The information that is available is not complete,
not up-to-date and not reliable enough to be used for planning, monitoring and
auditing disaster-related aid.
And specifically, talking of the transparency of tsunami-related aid, the

INTOSAI task force report said that (2007: 5):
● There is no overview of relevant stakeholders and the aid handled by

them;
● There is no reliable or complete overview of aid flows in available aid
coordination databases;
● There has been a loss of identity of significant portions of aid (is aid
public or private?);
● There is a lack of standardisation in definitions (for example, administra-
tive costs), and accounting and reporting standards;
● It is extremely difficult to follow aid from source to destination, due to a
lack of information (e.g., on purpose, destination, projects, amounts and
sector).
A second aspect of the international aid system is that raising funds is

sometimes given priority over disbursement and accountability. The
international aid industry is understandably concerned about the need
to mobilize resources. Considerable effort therefore goes into fund-
raising, including into publicizing the successful aspects of aid programs.
But the industry is sometimes less successful in the more mundane tasks of
spending the money well in developing countries and accounting for the
expenditures. Telford and Cosgrave (2007b) summarized the situation as
follows:
In the aftermath of the tsunami, media-driven competition and political

considerations resulted in what was described as a donor ‘beauty contest’.
The problem was not the funding itself, but the mechanisms through which
it took place. Official funding decisions were not made on the basis of need.
Assessments were often slow, overlapping, poorly shared and imprecise.
Flawed financial tracking systems were incapable of presenting a comprehen-
sive and up-to-date picture of funding. In particular, they failed to account for
the substantial contributions made by the people and the governments of the
affected countries, and Muslim sources that operate outside the ‘conventional’
relief framework.

Indeed, many of the staff working for well-known multilateral and bilat-
eral development agencies are officials and planners mainly involved in
‘upstream’ or ‘wholesale’ aspects of the administration of international
assistance. The nuts-and-bolts tasks in the aid industry of delivering activi-
ties in the developing countries are often outsourced to service providers
of various kinds – to contractors, consultants, NGOs, education and
training and health providers, and so on.
These arrangements, which relate to the structure of the supply side in
the global assistance industry, prompt a number of questions for the deliv-
ery of emergency aid. Are systems in place to direct spending into the right
areas? Do the delivery systems at the ‘retail’ end of the aid industry operate
effectively, especially in times of severe stress following disasters? Is there a
‘missing middle’ in the international development debate (between discus-
sions of the mobilization of funds and broad aid outcomes) that reflects a
need for more attention to be given to the administration and management
of aid delivery on the ground?
A third issue relates to trade-offs between quantity and quality. Issues of
whether there are trade-offs between the quantity and quality of spending,
and if there are, what choices are appropriate, need consideration in the
delivery of assistance in post-disaster programs. There are many who wish
to see significant increases in the volume of international assistance. But
it is also true that much attention has been given by international donors
in recent years to the issue of the quality of aid. And to some extent, the
differences of view between those who argue that quantity and speed are
important and those who stress quality have been evident in recent discus-
sions about post-tsunami delivery programs.
On the one hand, there were numerous comments in the media and
elsewhere about delays in providing post-tsunami assistance. In some
cases, there were instances of demonstrations (such as in Banda Aceh on
21 September 2006 when a crowd of people protesting against delays in
the provision of housing gathered outside government offices). It would
seem, at least from anecdotal evidence, that affected local communities in
tsunami-affected areas tended to favour more rapid disbursement of funds
where possible.
On the other hand, many international observers emphasized quality.
This approach was implicit in the ‘build back better’ motto which
attracted considerable support from international agencies in the delivery
of post-tsunami aid programs. Reflecting these views, Brusset et al. (2006:
ii) argued that:
Although the recovery period has taken time to move into high gear, there are
many reasons for proceeding slowly, perhaps the most important being to get

it right. The Government of Indonesia, leading the process, will ultimately be

judged by its own people less for slowness and caution than on the quality and
sustainability of final outcomes . . .
In a similar vein, Paul O’Callaghan, Executive Director of the Australian

peak NGO group Australian Council for International Development
(ACFID) (media statement, 30 March 2006) said that:
It would be a mistake to rush projects and build shoddy structures simply to

demonstrate rapid progress. We have aimed to ‘build back better’ through
close consultation with local communities. The reconstruction of Darwin [in
Australia] after Cyclone Tracy [in 1974] took over six years. For this more
complex disaster, the process requires governments and international agencies
to remain committed for a very long period in order to produce the necessary
quality of results.
It would seem that there are some significant differences of emphasis

about the issue of the priority to be given to quantity and quality, not least
between local communities on the one hand (the consumers) and interna-
tional providers of assistance on the other (the producers).
A fourth issue which received much attention in the delivery of post-
tsunami aid programs was the targeting of assistance. The effective target-
ing of aid is a subset of the broader issue of the quality of development
assistance. In Sri Lanka, for example, Jayasuriya et al. (2006: 47) noted
that ‘The selection of beneficiaries for housing grants has caused dissatis-
faction in some places’, and in both Sri Lanka and Indonesia there were
numerous problems reported with the provision of assets such as housing
and fishing boats.
Dissatisfaction on the part of recipients is easy to understand.
However it is also true that the effective targeting of government pro-
grams in developing countries, even during normal times when agencies
are not operating under emergency conditions, is often difficult. One
recent survey from India (Srivastava 2005: 72) concluded that ‘poverty
targeting in India has achieved some modest success but in general
the picture is highly disappointing . . .’ A survey of Indonesian pro-
grams (Perdana and Maxwell 2005: 125) observed that ‘the targeting
of poverty alleviation programs in Indonesia has been a difficult and
frustrating process’.
Perhaps the best that can be hoped for under emergency conditions in
developing countries is a second-best approach to targeting. In such situ-
ations to aim for the best can be the enemy of the good. The use of a com-
bination of techniques designed, in broad terms, to encourage improved
targeting might achieve an acceptable outcome. A broad brush approach

which mainly relies on the provision of basic supplies and housing, com-
bined with the supply of appropriate social goods (elementary health
support and education) along with grants and food-for-work programs
might indeed be the most appropriate way to ensure that the largest
amount of assistance reaches those who most need it.
Finally, the way in which aid money is spent following disasters needs
close consideration. Traditionally, a great deal of post-disaster aid in
developing countries has been given in kind in one form or another – as
food and fuel, clothing, shelter, materials, health and education support,
and through post-emergency development projects such as roads and agri-
cultural development programs.
However assistance does not need to be provided in this way. Far
more aid than is currently provided could be disbursed in the form of
cash or cash-based forms of aid such as vouchers or through cash for
work (CFW) programs (Harvey 2007). Indeed, a considerable variety
of cash-based forms of aid were used by various assistance agencies in
Aceh. The list of measures included the following (Kelaher and Dollery
2008: 121):
● Cash for work and cash for food programs;

● Asset replacement through cash grants and vouchers;
● Cash for non-food items (household utensils, work tools, hygiene
kits, clothing, drugs, and health equipment);
● Cash for materials for communities and livelihood activities;
● Cash grants for families hosting displaced persons; and
● Indonesian government social welfare assistance which included
US$0.40 (approx.) per day per person, direct cash assistance of
US$10 per person per month, and other forms of support for the
poor.
As this list shows, cash-based forms of aid can be provided for a wide
range of purposes and can be tailored by policy-makers to provide quite
specific incentives.
In fact, it is donors themselves who often insist on providing aid in kind.
And from one point of view, this traditional attachment to the provision
of aid in kind reflects a reluctance to relax bureaucratic controls over the
delivery of programs, as Harvey notes (2007: 1):
Obstacles to the use of appropriate cash are partly institutional in the sense that
some donors continue to tie assistance to food aid . . . Reluctance to use cash
is also a function of the individual attitudes of aid providers, and the sense that
cash is threatening because it implies handing over power from the agency to
the beneficiary.

The international literature relating to public policy issues is full of exam-

ples of the advantages, in appropriate conditions, of cash-based forms of
assistance. And within rich countries, a large proportion of the transfers
that governments provide to citizens is in the form of cash. Indeed, fol-
lowing disasters in rich countries, it is common for governments to make
quite large amounts of assistance available to affected populations in the
form of cash. This prompts the question of whether or not more disaster
assistance in developing countries should be provided through cash-based
forms of aid.
A survey by Harvey (2006) which provides a useful review of the role
of cash transfers in emergencies notes two main findings. The first is that
cash and voucher approaches remain largely underutilized. The second is
that there is increasing experience in the use of cash and voucher programs
which suggests that these approaches are useful. Post-tsunami experience
in Aceh supports these conclusions (Kelaher and Dollery 2008; Doocy et
al. 2006). Harvey summarized the findings of Doocy et al. as follows (2006:
275):
For the majority of CFW participants and their households, cash for work
was the only source of household income . . . The CFW program empowered
displaced populations to return to their communities . . . Other reported
psychosocial benefits indicated giving communities an opportunity to work
together. Perhaps the most striking features of the programme were its scale
and speed. The programme began on 7 January 2005, just two weeks after the
tsunami, was implemented in 60 villages, and at its peak had nearly 18,000
participants and was disbursing over USD 1 million per month. [Emphasis
added]
Further, by their very nature, programs of this kind which create jobs tend
to be self-targeting on lower income groups. The average daily rate for
unskilled labour in the Mercy Corps program in Aceh was set at approxi-
mately US$3 per day while the average reported monthly income for
households included in the scheme was around US$300 (of which over 90
per cent was attributed to the CFW activities).
A further advantage of cash-based programs is that, properly designed,
they work to rebuild the independence of communities devastated by
disasters. The UN Special Envoy for Tsunami Recovery, Bill Clinton,
drew attention to this aspect of cash-based programs in a ‘lessons learned’
report that he issued at the end of his period as UN Envoy (Clinton 2006:
5):
A greater reliance on direct cash transfers to households has also been a positive
feature of the tsunami effort, helping to empower local communities and fami-
lies. Shortly after the tsunami, hundreds of thousands of people were involved

in cash-for-work projects, clearing rubble, repairing small infrastructure, or

cleaning paddy fields. The majority of houses under construction in Sri Lanka
are being managed through an owner-built scheme under which beneficiaries
receive cash installments to rebuild their own houses.
Emphasizing the importance of empowering local communities to take on

tasks of local rebuilding, Clinton suggested that ‘More resources should be
directed to cash-for-work programs, owner-build housing schemes, micro-
finance, and other approaches that put resources directly into survivors’
hands to chart their own path to recovery.’
It is true that there are pros and cons in disbursing post-emergency
assistance in cash-based forms. However, the indications are that the use
of cash-based delivery programs warrants more attention than the matter
has so far received.
CONCLUSION
This chapter has considered matters relating to the financial flows associ-
ated with the Asian tsunami. Some main issues on both the revenue and
expenditure sides of the financial flows have been discussed. It has proved
extremely difficult to obtain satisfactory data on the overall flows of
finances associated with the tsunami relief operation. However, it needs to
be noted that the problems of obtaining reliable information relate more
to issues of coordination and difficulties of administration rather than to
matters of deliberate mismanagement or malfeasance. INTOSAI summa-
rized the situation as follows (INTOSAI 2007: 7–8):
Currently organizations involved in the humanitarian aid sector have to

report to various stakeholders with different reporting requirements regarding
accountability and have to provide a level of assurance to their accountability
organizations (for instance an unqualified opinion by an external auditor). . . .
Due to complexities in the accountability and transparency of disaster-related
aid flows, it is often unclear which organisation is accountable to whom, and
for what. The identity of Tsunami-related funds is blurred and sometimes even
lost, due to the mixing of public and private funds, and the splitting of accu-
mulated funds. This creates difficulties for the overview of aid flows and blurs
accountability and audit responsibilities.
In short, the performance of the international donor community some-

times fell below the standards of financial reporting generally expected
in the delivery of international aid (Telford and Cosgrave 2007a). But to
no small degree, quite serious difficulties of international coordination

contributed greatly to these problems. The issues surrounding the difficul-

ties of coordinating tsunami assistance are taken up again in Chapter 7.
NOTES
1. For a more recent view, see the thoughtful discussion in Masyrafah and McKeon
(2008).
2. For reasons which the text makes clear, unless otherwise specified, all financial references
in this chapter should be regarded as approximate.
3. See also the detailed supporting notes to the Flint and Goyder study, in Overall Funding
Flows (German et al. 2006).
4. A careful set of adjustments to the data would provide information on the following:
(a) flows by donor and recipient country; (b) terms of aid (time period covered by
the funding, form of aid by grants and loans including conditions of loan terms, and
conditionalities); (c) national and local contributions as well as international contribu-
tions; (d) an estimate of net additionality; and (e) other contributions not covered by
these flows, including military contributions, resources provided in kind, and private
remittances.
5. A similar set of issues attracted comment during the response to the earthquake in
Yogyakarta in May 2006.
6. The World Bank data for 2009 are for Indonesia but may perhaps be taken as a proxy for
overall patterns of spending including spending in other countries.
7. According to the comprehensive User Manual for the Regional DAD, the DAD is ‘a
powerful tool for tracking and analysing aid flows’ and is a ‘centralized system for track-
ing aid flows to the entire region affected’.
8. UNORC Aid Coordination Advisor, quoted in TGLL (2009: 63).
9. The website is at http://tsunamitracking.org/undprcb/.
REFERENCES
ADB (2008), Indonesia: Aceh-Nias Rehabilitation and Reconstruction, Progress

Report, Project no 39127, June.
Australian Government, Australian National Audit Office (2006), Arrangements
to Manage and Account for Aid Funds Provided under the Australia-Indonesia
Partnership for Reconstruction and Development, Canberra: Australian National
Audit Office.
Batha, Emma (2005), ‘Post-tsunami chaos wastes aid’, Reuters Foundation,
AlertNet, 5 October 2005, http://www.alertnet.org/thefacts/reliefresources/
112849687980.htm, accessed 31 October 2009.
Brusset, Emery, W. Pramana, A. Davies, Y. Deshmukh, S.B. Pedersen, R. Davies
and T. Vaux (2006), Evaluation of the Linkage of Relief, Rehabilitation and
Development (LRRD) Regarding Interventions in Connection with the Tsunami
Disaster in December 2004: Indonesia Case Study, Report prepared by Channel
Research for SIDA, March, Ohain, Belgium.
Carter, W. Nick (1991), Disaster Management: A Disaster Manager’s Handbook,
Manila: ADB.
Clinton, William J. (2006), Key Propositions for Building Back Better, United Nations:
Office of the UN Secretary General’s Special Envoy for Tsunami Recovery,

http://ochaonline.un.org/OchaLinkClick.aspx?link=ocha&docid=1005912,
Commonwealth of Australia, AusAID (2007), Relief in Sight: Australia’s Inter-
national Disaster Response in Pictures, Canberra.
Doocy, Shannon, M. Gabriel, S. Collins, C. Robinson and P. Stevenson (2006),
‘Implementing cash for work programmes in post-tsunami Aceh: experiences
and lessons learned’, Disasters, 30 (3), 277–96.
Flint, Michael and H. Goyder (2006), Funding the Tsunami Response: A Synthesis
of Findings, London: Tsunami Evaluation Coalition.
German, Tony, J. Randel, T. Mowjee and L. Baker (2006), Overall Funding Flows,
Background Paper prepared for the Tsunami Evaluation Coalition, Somerset,
UK: Development Initiatives.
Harvey, Paul (2006), ‘Editorial: mini special issue on cash transfers’, Disasters, 30
(3), 273–76.
Harvey, Paul (2007), Cash-Based Responses in Emergencies, HPG Report 24,
January, London: ODI.
Hovanesian, Ashot and A. Cox (2007), ‘ICT for tsunami recovery: best practices
and lessons learned’, paper presented at the East-Asia Conference, Malaysia,
2007.
INTOSAI (2007), Activity Report of the INTOSAI Task Force on Accountability
for and Audit of Disaster-Related Aid, memo submitted to the XIXth INCOSAI
Meeting 2007, Mexico City, Mexico, November, www.intosai.org/blueline/
upload/15ie.pdf, accessed 10 September 2009.
Issues and Challenges in Sri Lanka, ADB Institute Research Paper 71,
January.
Kelaher, David and B. Dollery (2008), ‘Cash and in-kind food aid transfers: the
case of tsunami emergency aid in Banda Aceh’, International Review of Public
Administration, 13 (2), 117–28.
Lampman, J. (2005), ‘Much has been given, much still to be done’, Christian
Science Monitor, 21 November.
Masyrafah, Harry and J.M.J.A. McKeon (2008), Post-Tsunami Aid Effectiveness
for Development Working Paper 6, Washington: The Brookings Insti-
tution, http://www.brookings.edu/~/media/Files/rc/papers/2008/11_aceh_aid_
McCawley, Peter (2006), ‘Aid versus trade: Some considerations’, Australian
Economic Review, 39 (1), 89–95.
Nasution, Anwar (2009), ‘The auditing of tsunami disaster relief funds in Aceh
and Nias between 2004–2009’, PowerPoint presentation at the International
Public Sector Convention 2009, March, Sydney, http://www.bpk.go.id/web/
files/2009/03/tsunami-warna-revised-13-03-091.pdf, accessed 9 September 2009.
Oddone, R. (2005), ‘How dodgy accounting on donors’ budgets continues to dilute
aid’, Financial Times, 5 September, p. 12.
OECD, DAC (2001), ‘Is it ODA?’, May, http://www.oecd.org/dataoecd/2/21/
34086975.pdf, 15 January 2009.
Perdana, Ari A. and J. Maxwell (2005), ‘Poverty targeting in Indonesia’, in John
Weiss (ed.), Poverty Targeting in Asia, Cheltenham, UK and Northampton,
MA, USA: Edward Elgar and the Asian Development Bank Institute.
Ramkumar, Vivek (2006), ‘Analyzing the UN tsunami relief fund expenditure

tracking database: can the UN be more transparent?’, The International Budget

Project, www.internationalbudget.org, accessed 26 June 2008.
Sen, Amartya (2005), ‘Ethics, development and disaster’, keynote address at the
IDB, 11 January 2005, www.iadb.org/ethics, accessed 5 November 2006.
Srivastava, Pradeep (2005), ‘Poverty targeting in India’, in John Weiss (ed.),
Poverty Targeting in Asia, Cheltenham, UK and Northampton, MA, USA:
Edward Elgar and the Asian Development Bank Institute, pp. 34–78.
Telford, John and J. Cosgrave (2007a), ‘The international humanitarian system
and the 2004 Indian Ocean earthquake and tsunamis’, Disasters, 31 (1),
1–28.
Telford, John and J. Cosgrave (2007b), ‘Tsunami exposes flaws in the interna-
tional humanitarian response system’, id21, ODI blog, www.id21.org/id21ext/
s10cjt1g1.html, accessed 15 September 2009.
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Legacy: Innovations, Breakthroughs and Change, TGLL Project Steering
Committee, http://www.reliefweb.int / rw / rwb.nsf / db900sid / MUMA-7RF7PQ?
OpenDocument, accessed 26 August 2009.
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in Indonesia and Sri Lanka, but Key Projects May Exceed Initial Cost and
Schedule Estimates, Report to Congressional Committees, GAO-06-488, April,
Washington DC.
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Indonesia country website, http://go.worldbank.org/TE61DUE9G0, accessed
17 September 2009.

APPENDIX 3A.1 WHAT IS ‘AID’?

Like many other economic magnitudes, ‘aid’ may be defined in various
ways. And, like many other economic magnitudes, the term is often used
in a vague way.
A useful place to start is the internationally accepted definition of net
official development assistance (net ODA) agreed to by OECD member
countries (OECD 2001).1 In an effort to encourage some uniformity in the
way in which financial terms are used in the global aid industry, donor
countries have agreed on a careful definition of ODA. But despite the
attempts of the OECD’s Development Assistance Committee to encour-
age more accuracy and transparency in the reporting of aid terms, there
is still much vagueness in both official reporting of aid flows and public
policy discussion of the issues, including magnitudes. This vagueness is the
source of much confusion (McCawley 2006).
Official Reporting
There are various reasons for the vagueness. One is the considerable confu-
sion that surrounds many references to financial flows. Terminology used
in the international aid industry is often vague about such key matters as
differences between net and gross flows, loans and grants, the financial
and other conditions on which loans are provided, commitments and
disbursements, and the time period during which an announced program
will be implemented. Clearly, the real value of assistance programs varies
greatly depending on the conditions under which funding or other assist-
ance is provided. An untied grant for an agreed development purpose, for
example, would normally have a net ODA value equal or close to 100 per
cent while a loan of the same amount provided on market terms would
normally not be classified as ODA at all (OECD, DAC 2001).
Despite the fact that the conditions on which funds are provided are
crucial in assessing the real value of aid, bilateral and multilateral develop-
ment agencies are often vague about these matters. Press announcements
are frequently issued referring in general terms to levels of ‘assistance’ or
‘support’, or perhaps to ‘total project value’. In fact, announcements of
this kind usually provide very little useful information about the level of
net ODA transfers. But the differences between the various magnitudes
which may be described as ‘assistance’ can be very substantial indeed.
In this context, it is instructive to consider the difference between four
magnitudes frequently referred to when discussing project activities in
developing countries:

● total project costs

● loan approvals
● loan disbursements, and
● net transfers.
Differences between these magnitudes can be very substantial indeed.

Depending on circumstances, a relatively large project in a developing
country (say, amounting to US$1000 million) ‘supported’ by international
donors might involve only very small net transfers. To complicate the
picture further, none of these magnitudes refers to net ODA.
There are other considerations that frequently make it difficult to form
meaningful judgements about the size of aid flows. One is timing; official
announcements often indicate that programs will be implemented over a
period of time (three or four years is quite common). This means that it is
often difficult to know how much will be spent in any particular year, or
indeed even when the programs will be regarded as having begun! Another
is that it is not uncommon for the same program to be announced on a
number of occasions. This practice leads to the risk of double-counting in
media reporting about aid programs. The upshot of factors such as these
is quite unsatisfactory. The inevitable result is that there is often consider-
able vagueness and even confusion across the international community
about the size of aid programs (Oddone 2005).
Media Coverage
A second and quite different reason why many people think that interna-
tional aid programs are much larger than they are is the language used
in media reports about aid. Media reports often tend to use extravagant
language to describe aid programs. Aid is said to be ‘huge’, ‘massive’,
or is described as ‘largesse’ which is ‘poured’ into recipient countries.
Governments in developing countries are said to be ‘rewarded’ with aid,
or to have aid ‘showered’ upon them. Other reports talk of borrowing
countries having aid ‘pumped in’, or of being ‘flooded’ with aid. Recipient
countries are said to have aid ‘heaped’ upon them with the result that they
are ‘awash’ with funds.
Reinforcing the impression that aid flows are large are statements from
political leaders in both donor countries and recipient countries. In donor
countries, leaders often describe national aid programs as ‘generous’,
while leaders in recipient countries often also find it useful for various
reasons to imply that volumes are significant. It is, in fact, hard to know
what to make of the frequent suggestions that donor nations are generous
because of the highly subjective nature of judgements about what sort of

actions might be described as ‘generous’. For example, an article in the

Christian Science Monitor about charitable contributions in the United
States in the period following the tsunami reported that ‘Americans have
given generously in 2005, reaching into their pockets . . . to respond to the
Asian tsunami and the Gulf Coast hurricane’ (Lampman 2005). However,
the article went on to note that out of the estimated total level of chari-
table contributions in the United States in 2005 of US$250 billion (which
was well over double the level of net ODA from all OECD countries to all
developing countries at the time), only 2 per cent, or around US$5 billion,
was typically provided to international aid. The great bulk of US charita-
ble giving is spent within the United States.
Against this background of confused aid statistics and extravagant
media coverage, it is not surprising that surveys of opinion in donor coun-
tries indicate that many people think that aid flows are large. The truth is
that compared with many other areas of public expenditure, the interna-
tional aid programs of OECD countries are quite modest, especially when
compared with the extremely ambitious objectives (‘Save the planet’ and
‘Make poverty history’) often set for these programs.
NOTE
1. Data relating to ODA flows (including definitions of relevant concepts) is provided by

the Development Assistance Committee of the OECD at www.oecd.org/dac.

4. Indonesia: the first two years after
the tsunami1
INTRODUCTION
Indonesia, the country worst hit by the December 2004 tsunami, is located
in the ‘Ring of Fire’ which consists of volcanic arcs and oceanic trenches
partly encircling the Pacific Basin. The Basin sits between the Indo-
Australian and Eurasian plates, making it a zone of frequent volcanic
eruptions and earthquakes. Historically, several of the natural disasters
that have occurred in Indonesia have been among the worst in the world.
The Tambora and Krakatoa eruptions in 1815 and 1883 were among
the largest eruptions in history. Further, the contour and climate of the
archipelago increase the likelihood of other deadly natural disasters such
as cyclones, droughts, and floods. From 1907 to mid-2006 there were
338 natural disasters in Indonesia – an average of around three to four
disasters per year.2 On average, approximately 700 people died, 1200
were injured, 5200 became homeless, and 64 000 people were affected per
event.3 Indonesia is considered to be among the five countries that most
frequently experience deadly natural disasters – the others being the US,
the People’s Republic of China, India, and the Philippines. Recent data
suggests that the frequency of these deadly events may be increasing in
these countries (Figure 4.1).
In terms of human fatalities the tsunami on 26 December 2004 was the
worst natural disaster in Indonesian history. Most people in Aceh and
North Sumatra and other nearby parts of Indonesia felt the tremor caused
by a massive earthquake measuring 9.0 on the Richter scale that occurred
beneath the seabed about 300 kilometres off the west of Sumatra around
8 am local time. Shortly after, a great tsunami hit the northern and western
parts of Aceh and North Sumatra as well as other smaller islands such as
Nias and Simeulue. Twenty-metre waves struck Banda Aceh, the provin-
cial capital city of the province of Aceh, at a tremendous speed of around
800 kilometres per hour. In some places waves swept over seven kilometres
inland. Waves as high as 12 metres hit the towns of Meulaboh, Calang,
and Lamno in western Aceh and in some places up to about 10 kilometres
from the coastline were submerged (Soehaimi et al. 2005). The official
68

Indonesia: the first two years after the tsunami 69
300
250
200
150
100
50
0
1951–60 1961–70 1971–80 1981–90 1991–2000 2001–05
Philippines Indonesia India PRC USA
Source: http://www.em-dat.net/, accessed 3 March 2007.
Figure 4.1 Frequency of natural disasters in the five countries most prone
to natural disasters, 1951–2005
death toll (including missing) in Aceh and Nias was close to 167 000. More
than 500 000 persons were displaced. Official reports also listed widespread
destruction, including the loss of over 110 000 houses, 3000 kilometres of
roads, 14 seaports, 11 airports and air strips, 120 arterial bridges, 2000
school buildings, and eight hospitals, among much other damage (BRR
and International Partners 2005; BRR 2006).
On 28 March 2005, while Aceh was still coping with the first emergency,
another major earthquake devastated the western part of Sumatra. The
epicentre of this earthquake, 8.7 on the Richter scale, was located to the
north of Nias – halfway between Simeulue and the Nias islands (Figure
4.2). Although the government never declared this to be a national disas-
ter, for an island as small and poor as Nias the impact was overwhelming.
Over 800 people died and 6300 were injured. In the capital city of Gunung
Sitoli around 70 per cent of the buildings collapsed. There was widespread
fear and it was estimated that over 15 000 people fled the island. The earth-
quake disrupted the livelihood of the entire population of Nias, most of
whom are farmers and fishermen (Kompas, 29 March 2005; Aceh Media
Center, 5 May 2005; BPS Kabupaten Nias 2005).
This chapter aims to evaluate the rehabilitation process in Aceh and
Nias as at the end of 2006, two years after the tsunami. The evaluation

Figure 4.2 Aceh, Nias and the epicentres of the earthquakes
sets out to assess progress and to identify the challenges of redevelopment.

With this goal in mind, three main tasks were undertaken. First, a survey
of the data sources on the impact of the disasters in Aceh and Nias and
on the progress of reconstruction was conducted. Second, data from the

census (Sensus Penduduk Aceh dan Nias or SPAN 2005) carried out by the
Indonesian Central Statistics Agency (Badan Pusat Statistik or BPS) in
Aceh and Nias in September 2005 was analysed to obtain a picture of the
impact at household level (see BPS, Bappenas et al. 2005a; 2005b, hereafter
cited as SPAN 2005).4 Third, interviews with national government officials
in Jakarta, local government officials, officials at the Badan Rekonstruksi
dan Rehabilitasi (BRR) reconstruction agency, contractors, and many
others were arranged. Most of the interviews took place in January, May,
and June 2006. A triangulation procedure was applied to draw inferences
from these interviews (Patton 2002).5
This chapter is structured as follows. Following this introduction, back-
ground material is provided on the socio-economic and political situation
in Aceh and Nias before the disasters. In particular, information is pro-
vided about political conflicts and the Aceh freedom movement. The next
section summarizes the impact of the December 2004 tsunami in Aceh and
the March 2005 earthquake in Nias. This section is followed by a discus-
sion of the emergency relief stage. Three main issues need to be elaborated
upon concerning the foundations of the recovery:
● the Master Plan,

● the establishment of the reconstruction and rehabilitation agency
(BRR), and
● the peace agreement between the Government of Indonesia (GoI)
and the Free Aceh Movement (GAM).
Then progress in various areas – land titling, housing, livelihood arrange-

ments, school and health services, and infrastructure – to the end of 2006 is
described. It is noted that progress towards meeting goals was slow and that
at that stage huge challenges remained. Issues relating to managing expecta-
tions, coordination and commitments, budget realization, and the exit strat-
egy of the BRR are also discussed. Finally, some conclusions are set out.
ACEH AND NIAS BEFORE THE DISASTERS
There are significant differences between the socio-economic and politi-

cal structures in Aceh and on the island of Nias. Aceh is a much larger
and more heterogeneous region than Nias. Aceh is a province while Nias
is only a small region of the province of North Sumatra (Figure 4.2).
Although the majority of the population in Aceh work in the agricultural
sector, the economy of Aceh has been dominated for decades by the oil
and gas industry. In contrast, Nias has a predominantly semi-subsistence

Table 4.1 GDP with and without oil and gas, Aceh, 2000–04 (billion
rupiah)
Year GDP GDP Growth Growth

(with oil & (without oil & (with oil & (without oil &
gas) (Rp bn) gas) (Rp bn) gas) (%) gas) (%)
2000 35 883 19 259 – –
2001 32 565 19 136 29.3 20.6
2002 39 961 20 426 22.7 6.9
2003 42 239 21 204 5.7 3.7
2004 39 664 21 778 26.1 2.7
Note: Based on 2000 constant prices. 2004 data are preliminary figures.
Source: Bappeda Aceh (2005).
economy. In the period before the tsunami, Aceh had experienced three
decades of serious political conflict while there had not been any serious
political turmoil in Nias.
Economic Conditions in Aceh
The regional GDP of the province of Aceh in 2003 was approximately

US$4.5 billion, about 2 per cent of the GDP of Indonesia. While the
economy of Aceh had generally benefited from the regional oil and gas
industry, in 2004 the local energy sector contracted somewhat, contribut-
ing to negative growth in the province (Table 4.1). The agriculture sector,
which made up around 32 per cent of regional GDP, also plays a key role
in the local economy. Agriculture absorbs almost 50 per cent of labour
in Aceh. Other major sectors of employment are trade (21 per cent) and
public services (18 per cent) (Bappeda Aceh 2005).
In the early 2000s Aceh’s exports to other parts of Indonesia were small,
around 8 per cent of regional output. About 26 per cent of Aceh’s output
was exported abroad and 66 per cent was consumed within the province.
Imports from other parts of Indonesia and from abroad were a small part,
about 6 per cent and 4 per cent, respectively, of the total material inputs
needed for Aceh’s productive sectors (Athukorala and Resosudarmo
2005). Regional inflation (as measured in the provincial capital of Banda
Aceh) was moderate in the period just before the tsunami (Figure 4.3).
Aceh’s population was around 4.1 million in 2003. Although on paper
Acehnese GDP per capita (almost US$1100) was among the highest
in Indonesia because of the statistical boost to measured production

2.0
Banda Aceh
1.5
1.0
National
0.5
0.0
Jan-04 Mar-04 May-04 Jul-04 Sep-04 Nov-04
–0.5
–1.0
Source: Bappeda Aceh (2005).
Figure 4.3 Monthly rates of inflation (%), Banda Aceh, prior to

December 2004 earthquake and tsunami
provided by the oil and gas sector, in fact many local areas in Aceh did not
receive noticeable benefits from the enclave energy sector and were quite
underdeveloped. Indeed, before the tsunami, the Indonesian Ministry for
the Development of Least Developed Regions classified eleven districts
in Aceh (around half of the total in the province) as ‘least developed dis-
tricts’. In 2003 it was estimated that the percentage of poor people in Aceh
was almost 30 per cent compared to the Indonesia-wide figure of around
17 per cent. Aceh was among the five provinces with the highest percent-
age of poor people (BPS 2005). The long-term socio-political conflict was
widely believed to be one of the major causes for the lack of development
in the province (Soesastro and Ace 2005).
The Indonesian national decentralization program which became effec-
tive in 2001 brought dramatic changes to public revenue and expenditure
patterns in Aceh. Regional government spending in 2004 was double that
of 1999. However, the bulk of the expenditure was still for routine admin-
istrative expenses such as salaries and building maintenance (World Bank
2003 and 2006b; Bappeda Aceh 2005).
Economic Conditions in Nias
With a population of about 700 000 people, the island of Nias is consid-
ered to be one of the poorest regions in the province of North Sumatra.

There is not much trade between Nias and other parts of North Sumatra.
Its contribution to the provincial economy of North Sumatra is very small.
Per capita income was estimated at about US$340 per annum in 2004. The
share of the population living below the poverty line in 2002 was 31 per
cent, roughly twice North Sumatra’s level of 16 per cent or the Indonesia-
wide figure that year of 18 per cent. Further, compared to the regions in
the North Sumatra province and nationally, recorded human development
levels were low and signs of progress were also very slow. Close to half of
the household heads in Nias had only elementary schooling. About one-
third of children from 7 to 18 years of age did not attend school in 2002.
Despite the availability of health centres throughout the island, lack of
access to satisfactory basic health services was still widespread because of
inadequate services and poor infrastructure (BPS Kabupaten Nias 2005).
Lack of infrastructure is commonly cited as one of the main reasons for
the economic backwardness of Nias. Poor infrastructure limits mobility
across the island and isolates villages from markets, leading to low levels
of economic development. In 2004 the local Nias economy was still mainly
reliant on agriculture and trade services, accounting for almost 37 and 35
per cent, respectively, of the total regional GDP. Trade services in Nias,
however, are largely limited to activities conducted in the informal sector.
As in other backward regions of Indonesia, the role of local government in
the small formal sector of the economy was quite high. In 2004, total local
government expenditure was around Rp200 billion (a little over US$20
million), approximately 10 per cent of the Nias GDP (BPS Kabupaten
Nias 2005).
Conflict and Freedom Movements in Aceh
Socio-political conflict between the Free Aceh Movement (GAM) and the
Indonesian government began in the mid-1970s. Conflict escalated in the
five years prior to the 2004 tsunami, destroying or damaging about 900
schools, causing a dramatic decline in school attendance, and displac-
ing over 100 000 people. Meanwhile, health care became less accessible
because people were afraid to visit medical centres for security reasons
(Soesastro and Ace 2005; World Bank 2005). Another significant impact
was the drop in the number of economic establishments and in the quality
of infrastructure in the region. The total number of firms declined from
around 7600 in 2001 to only around 1200 by 2004. Many roads were not
properly maintained and people were often afraid to travel outside of their
towns and villages, particularly at night (Bappeda Aceh 2005).
The basic causes of the separatist movement can be found in the history
of the relationship between the people of Aceh and the central authorities

in Jakarta. During the Dutch colonial period the region was never for-
mally annexed. Consequently, during the early years of Indonesian inde-
pendence in the late 1940s there was a strong feeling in some quarters of
Aceh that the region should not be automatically incorporated into the
new state of Indonesia and that, certainly, the Acehnese people should
have been consulted as to whether they wanted to join with Indonesia or
to form an independent state. Twenty years later, the centralized mode of
government during Soeharto’s ‘New Order’ government strengthened this
sentiment among some Acehnese, particularly when the central govern-
ment signed contracts with foreign companies for the mining of natural
resources in Aceh without consultation with the people of Aceh. Much
local resentment was generated when the Acehnese realized that most
of the income from the oil and gas activities in the region flowed to the
central government rather than into local coffers.
The armed struggle waged by the GAM guerrilla movement escalated in
the 1980s when they allegedly received support from overseas groups. The
Government of Indonesia responded with repressive measures and placed
the region under Operational Military status. This led to an increase
in local conflict, causing deaths and a rise in the number of internally
displaced persons. During the military operations, both GAM and the
Indonesian government accused each other of violating human rights. The
military operation officially ended in 1996. However, the military pres-
ence in the region was not reduced, even after President Soeharto stepped
down from office in 1998. In fact the military presence is thought to have
increased in the early 2000s during the Megawati Sukarnoputri adminis-
tration (World Bank 2006b).
THE IMPACTS
This section reviews the impact of both disasters – the December 2004
tsunami in Aceh and the March 2005 earthquake in Nias.
Human Loss and Displacement
Within days of the December 2004 tsunami, international news reports

led the world to expect huge losses in Aceh. Nevertheless, it was several
months before the world knew of the real extent of the death toll and
the numbers missing, and of the continuing plight of internally displaced
persons (IDPs) in Aceh. Indeed, different agencies provided different
numbers. The official death toll in Aceh was estimated at close to 167 000
by the Department of Social Affairs in mid-March 2005, and the number

displaced was put at 811 000, of whom 920 were in hospitals while
approximately 477 000 were living in refugee camps. Several organizations
reported that children, women, and the elderly accounted for more than
two-thirds of the tsunami victims (see also Athukorala and Resosudarmo
2005). This meant that the demographic structure of many villages and
towns hit by the tsunami had changed dramatically. By 1 June 2005,
the Secretary General of the United Nations, Kofi Annan, described the
Aceh tsunami as ‘the largest natural disaster the organisation has had to
respond to on behalf of the world community, in the 60 years of our exist-
ence’ (UN Press Release SG/SM/9666 IHA/978, 6 January 2005).
In contrast, Nias did not suffer greatly as a result of the tsunami.
The March earthquake resulted in a high local death toll which was,
however, small in total compared to that in Aceh. The official BRR
report stated that 850 people had been killed and 6000 injured (BRR
Nias 2005).
As noted earlier, in response to the need for accurate demographic data
after the disaster, BPS conducted the Aceh-Nias population census (SPAN
2005) in September 2005 (Table 4.2). The earthquakes and tsunami dis-
placed a total of almost 900 000 people. In September 2005, almost 260 000
people still held IDP status. The districts of Aceh Jaya, Aceh Barat, Aceh
Besar, and the city of Banda Aceh suffered most from the tsunami (Table
4.3). Although it is impossible to determine the exact numbers more pre-
cisely, these estimates seem to provide a reasonably accurate picture of
the overall impact in terms of the numbers of people killed and missing.
The impact of the earthquakes and tsunami was certainly concentrated in
these areas.
It is important to note that the relatively high percentage of IDPs on
Simeulue Island was not preceded by a high death toll. Only seven deaths
were recorded on the island despite the fact that Simeulue is situated only
about 100 kilometres from the epicentre of the March earthquake. The
island was indeed severely hit by the December tsunami: approximately
5500 houses were destroyed and hundreds of people were injured (Kompas,
1 April 2005). There are two probable explanations for the relatively small
number of fatalities. First, the coastal ecosystem – the coral reef, sea grass,
and mangrove forests – softened the force of the giant waves. Second, local
customs and traditions on the island include important information about
the warning signs of a tsunami: according to local tradition a tsunami is
always preceded by the retreat of the sea, knowledge that has been trans-
ferred from one generation to another.
Indeed, the retreat of the sea did occur on the morning of 26 December
2004. Local inhabitants who recognized the signs of an impending tsunami
ran to the closest hills shouting ‘smong . . . smong . . . smong’ (tsunami in

Table 4.2 Population and internally displaced persons (IDPs), Aceh and
Nias, 2005
Region & sub- Population IDP in % Still IDP No longer % IDP

region in Sept. early 2005 IDP in Sept. IDP by in Sept.
2005 2005 Sept. 2005 2005
Aceh province 4 031 589 508 671 13 209 822 298 849 5
Aceh Jaya 60 660 34 198 56 27 755 6 443 46
Simeulue 78 389 56 606 72 15 498 41 108 20
Aceh Barat 150 450 47 660 32 28 018 19 642 19
Aceh Besar 296 541 67 554 23 46 998 20 556 16
Banda Aceh 177 881 92 589 52 24 210 68 379 14
Sabang 28 597 7 122 25 2 061 5 061 7
Nagan Raya 123 743 11 828 10 6 314 5 514 5
Aceh Singkil 148 277 28 040 19 7 106 20 934 5
Pidie 474 359 42 876 9 19 906 22 970 4
Bireuen 351 835 34 647 10 10 032 24 615 3
Aceh Selatan 191 539 19 366 10 4 547 14 819 2
All other areas 1 949 318 66 185 3 17 377 48 808 1
Nias region 712 075 387 102 54 47 055 340 047 7
TOTAL 4 743 664 895 773 19 256 877 638 896 5
Source: BPS et al. (2005a, 2005b).
the local language). Others took up the warning, running to the hills while
contributing to the chorus of ‘smong . . . smong . . . smong’. This simple
procedure proved to be very effective in Simeulue when the tsunami struck
(Wetlands International – Indonesia Programme 2005; Kompas, 1 April
2005). Sadly, in other areas of Aceh and North Sumatra such simple
traditional mitigation procedures imbedded in local cultures had never
existed or had been long forgotten. The experience in Simeulue suggests
it is important to develop programs strengthening local knowledge about
natural disasters. One way of doing so would be to introduce special train-
ing courses on natural disasters into the national elementary education
system across Indonesia.
SPAN 2005 also provided information on the impact of the disaster
on personal livelihoods and the daily lives of affected people (Table 4.4).
Almost 265 000 people in Aceh and over 85 000 in Nias lost their sources
of income; over 190 000 people in Aceh and almost 62 000 in Nias lost their
houses; and around 391 000 people in Aceh and 539 000 in Nias suffered
damage to their houses.

Table 4.3 Estimated number of people killed and missing in Aceh and
Nias, December 2004 and March 2005 tsunami and earthquake
disasters
No. of people killed No. of people missing

Aceh Province
Aceh Barat 10 874 2 911
Aceh Barat Daya 3 n.a.
Aceh Besar 92 166 15 176
Aceh Jaya 16 797 77
Aceh Selatan 1 566 1 086
Aceh Singkil 22 4
Aceh Tamiang n.a. n.a.
Aceh Tengah n.a. n.a.
Aceh Tenggara n.a. n.a.
Aceh Timur 52 n.a.
Aceh Utara 2 098 218
Banda Aceh n.a. 15 394
Bener Meriah n.a. n.a.
Bireuen 461 58
Gayo Lues n.a. n.a.
Langsa n.a. n.a.
Lhokseumawe 189 11
Nagan Raya 1 077 865
Pidie 4 401 877
Sabang 25 108
Simuelue 44 1
Nias Region
Nias 784 18
Nias Selatan 177 n.a.
Note: n.a. indicates data not available.
Source: Satkorlak Report (10–16 October 2005).
Physical Impacts
The immediate physical impacts of the December tsunami in Aceh and the
March earthquake in Nias were tremendous. The tsunami wiped out prac-
tically all physical objects in many parts of Aceh’s western and northern
coastal areas, flattening hundreds of thousands of houses, infrastructure
of all kinds, and many other facilities (Table 4.5).

Table 4.4 Impact on livelihood and daily life situation following December
2004 and March 2005 tsunami and earthquake disasters, Aceh
and Nias
Type of impact Aceh % of Nias % of pop.

population
House damaged 391 316 10 538 816 76
Loss of primary 264 650 7 85 462 12
source of income
Loss of house 191 353 5 61 588 9
Loss of household 106 480 3 3 097 ...
members
Mental illness 62 794 2 18 849 3
Disabled 6 639 ... 2 457 ...
Other impacts 279 877 7 109 331 15
Source: Authors’ calculation from SPAN (2005).
While the disasters in Aceh and Nias wrought similar types of devasta-
tion on local people, there was an important difference as to the causes. In
Aceh, a great wave smashed buildings, cars, trees, people, and everything
else in its path. Most of those who were able to climb up trees or onto
roofs or those in higher storey premises, survived. In Nias, the earthquake
preceding the December tsunami did not do much damage and caused few
deaths. But things were quite different in March. The March earthquake in
Nias destroyed numerous buildings. The fact that the March earthquake
occurred when most people were asleep added to the toll because when the
earthquake struck, houses collapsed and many sleeping occupants were
buried. In addition, the typical construction of houses in urban areas in
Nias also added to the fatalities. As is the case in other towns in Indonesia,
typical urban houses in Nias are made of bricks that have usually replaced
previous wooden structures. The foundations are usually not sufficiently
strong for a brick structure because compliance with building codes is
mostly lax. Worse, some homeowners add a second storey imposing addi-
tional strains on the inadequate foundations. This non-compliance with
building codes is the main reason why four out of five houses in Nias were
damaged (BRR Nias 2005).
In many cases in poorer areas of Aceh and Nias, the heavy physical
damage to infrastructure (such as fallen bridges) was apparently due to the
low quality of the structures or insufficient maintenance rather than to the
severity of the natural disasters. In rural areas, lack of proper maintenance

Table 4.5 Housing damage assessment following December 2004 and

March 2005 tsunami and earthquake disasters, Aceh and Nias
Region & sub- Total Damage level Total %

region houses damage damaged
Mild Severe Destroyed
in total
Aceh province 865 744 66 597 26 760 14 670 99 738 12
Simeulue 17 315 6 573 4 214 31 10 818 63
Banda Aceh 35 443 7 011 2 509 94 10 202 29
Aceh Barat 31 252 4 692 2 298 2 125 8 033 26
Nagan Raya 29 169 5 236 1 640 2 278 7 299 25
Aceh Singkil 31 442 5 972 1 564 7 7 650 24
Aceh Selatan 41 445 5 117 1 475 24 6 635 16
Aceh Jaya 11 539 733 438 32 1 716 15
Bireuen 74 564 7 623 2 426 5 10 379 14
Aceh Barat 24 685 2 068 855 149 2 976 12
Daya
Aceh Utara 106 581 8 273 2 068 1 449 11 764 11
Sabang 6 721 443 194 4 695 10
Aceh Besar 56 104 2 701 1 904 157 5 559 10
Lhokseumawe 32 824 1 901 526 5 2 452 8
Pidie 108 948 4 353 1 729 129 6 690 6
All other areas 257 712 3 901 2 920 8 181 6 870 3
Nias region 131 217 57 378 37 090 10 070 104 538 80
TOTAL 996 961 123 975 63 850 24 740 204 276 21
probably contributed to the destruction of schools or health facility build-

ings. In December 2005, the BRR announced its initial estimates of physi-
cal damage in Aceh and Nias caused by the natural disasters. In April
2006, the BRR corrected its estimates of damages, particularly regarding
damages in Nias (the corrected estimates are shown in Table 4.6).
Economic Impacts
The World Bank’s assessment of the total damage caused by the Aceh
tsunami was US$4.45 billion, almost equal to Aceh’s GDP in 2003.6 Of
this total, 60 per cent was estimated to be physical damage and 40 per
cent was from losses of income flows through the economy. Almost 80
per cent of total damage and losses was borne by the private sector while

Table 4.6 BRR estimate of destruction in Aceh and Nias, December 2004
and March 2005, and progress towards reconstruction, 2005–06
Destruction Progress
by December 2005 by December 2006
Housing 80–110 000 16 000 new houses 57 000 new houses and
houses in Aceh 15 000 transitional
and 13–14 000 in shelters
Nias
Infrastructure 3000 km of roads 235 km of roads over 1200 km of roads
restored (and in Aceh and 300 km in
major road projects Nias built/restored
underway)
14 seaports 5 major ports being All ports operational;
built 11 ferry terminals and
harbours in Aceh and
3 in Nias built/under
development
11 airports/ all airports operational:
airstrips 5 airports and 1
airstrip in Aceh and
2 in Nias built/under
development
120 arterial 35 arterial bridges 121 bridges in Aceh
bridges and 1500 rebuilt and 37 in Nias repaired
minor bridges
Education 2000 school 335 new schools 623 new schools in
buildings built Aceh and 124 in Nias
built
2500 teachers more than 1000 new 5100 teachers in Aceh
teachers trained and 285 in Nias trained
Health 8 hospitals and 38 hospitals and 305 health facilities in
114 health centres health centres rebuilt Aceh and 19 in Nias
(and 51 more under
reconstruction)
Fisheries around 5000 3122 boats replaced 4420 fishing vessels
fishing boats replaced
20 000 ha of fish 5000 ha of fish 6800 ha of fishponds
ponds ponds repaired rehabilitated
Agriculture 60 000 farmers 40 000 farmers 68% of male and 45%
displaced assisted to return of female labour force
are working in rural
areas

Table 4.6 (continued)
Destruction Progress
by December 2005 by December 2006
Agriculture 70 000 ha of 13 000 ha of 50 000 ha of farmland
(cont.) agricultural land farmland restored restored
Enterprises more than 7000 workers given 69% of male and 36%
100 000 persons skills training of female labour force
lost livelihoods in (and over 120 000 actively engaged in
small business benefited from cash- urban areas
for-work schemes)
Source: BRR and International Partners (2005); BRR and Partners (2006).
the rest was borne by the public sector (World Bank 2005). The Institute
for Economic and Social Research (LPEM) at the Faculty of Economics,
University of Indonesia, estimated the total damage in Aceh to be slightly
higher than the World Bank’s estimate at US$4.6 billion (LPEM 2005).
The World Bank also estimated the damage of the March earthquake
in Nias to be around US$392 million. Therefore, after adjusting for pre-
dicted inflation, the World Bank put the expected cost of repairing the
damage caused by the two disasters at around US$5.8 billion (BRR and
International Partners 2005).
According to the World Bank, Aceh’s GDP in 2005 could contract by
7–28 per cent of the 2004 level (World Bank 2005). LPEM (2005) arrived
at a slightly lower estimate than the World Bank’s upper estimate (22
per cent). The destruction in the province of North Sumatra was mainly
concentrated in Nias, the poorest district in the province and one whose
contribution to the overall regional economy is rather small. In Nias, the
island economy was predicted to contract by around 20 per cent (BRR and
International Partners 2005).
The oil and gas industry in Aceh escaped the tsunami virtually unharmed.
The most seriously affected sector in terms of both the number of casual-
ties and capital destroyed was agriculture, particularly fisheries (Soesastro
and Ace 2005).
According to information gathered by the Ministry of Marine Affairs
and Fisheries, by mid-January 2005 approximately 55 000 fishers and
aquaculture workers were confirmed dead (approximately one-half of the
total number of fishers in Aceh) and around 14 000 were still missing. The
Food and Agriculture Organization of the United Nations (FAO) reported
that 40–60 per cent of coastal aquaculture ponds along coastal Aceh and

between 36 000 and 48 000 hectares of brackish-water aquaculture ponds

(which mainly produced shrimp and milkfish) were seriously damaged. It
is estimated that about 65–70 per cent of the small-scale fishing fleet and
associated gear was destroyed in Aceh (FAO 2005a).
In Aceh about 30 000 hectares of rice fields – around 10 per cent of
the area under rice cultivation in the province – were badly affected. Soil
salinity problems were the main concern. Fortunately, because of humid
conditions, salt-polluted arable land was cleaned by rainfall and by irriga-
tion water relatively quickly. A survey carried out by FAO in early 2005
indicated that salt deposited in more than two-thirds of the affected agri-
cultural land was leached out within a few months allowing planting to
resume in April and May 2005. It was estimated that only 9000 hectares
could no longer be used for farming (China View, 31 March 2005; FAO
2005b).
The impact of the decline in Aceh’s GDP on Indonesia’s overall eco-
nomic performance was small. Both the World Bank and the LPEM
estimated that Indonesia’s GDP growth in 2005 was expected to be no
more than around half a per cent less than the pre-tsunami growth forecast
(World Bank 2005; LPEM 2005). An immediate sharp increase in poverty
was probably the single most serious economic problem caused by the
tsunami. In 2004, the Indonesian Central Bureau of Statistics calculated
that almost 30 per cent of people in Aceh were living below the poverty
line. At the time, LPEM predicted that this figure could grow to around
50 per cent.
THE IMMEDIATE RESPONSE
Rescue and Relief
In the first couple of days after the tsunami, little information was received
by the outside world so initial rescue operations were relatively limited
and slow. In this early stage, local people had to depend on their own
resources to survive for some days before Indonesian government agencies
responded. Soon after, when the outside world began to realize what had
happened, international responses started to get underway. During this
first week, the Indonesian military – which had come under some criticism
for their military operations in Aceh – provided crucial assistance in con-
ducting rescue and relief operations and in helping to cope with the large
number of dead.
By the beginning of the second week, the numbers of domestic and
international aid organizations arriving in Aceh increased significantly.

Although there was some lack of coordination between these organiza-

tions, the fact that they were able to provide relief for the tsunami victims
was much more important. In the third week, the number of international
organizations arriving in Aceh continued to rise – around 250 domestic
and international organizations sent workers to Aceh. Countless others
provided other types of assistance (Sen and Steer 2005; Indrawati 2005).
The media also played a key role by attracting domestic and international
support.
By mid-February 2005, the UN Office for the Coordination of
Humanitarian Affairs (OCHA) recorded that total pledges and commit-
ments from over thirty countries and various organizations had reached
approximately US$800 million (OCHA 2005). Around 2.3 million people
were directly affected by the disaster so the aid contribution for rescue and
relief activities per person was about US$350. The norm in previous inter-
national fundraising attempts in the face of natural disasters in developing
countries has been a mere US$40 per person (Economist, 5 February 2005;
Athukorala and Resosudarmo 2005).
The Indonesian central government also responded quickly by announc-
ing at the end of December 2004 that the government would release
approximately US$5 million to support relief activities. The government
also announced that it would support operations in three phases: (1) emer-
gency rescue and relief operations, (2) rehabilitation and reconstruction
of basic socioeconomic infrastructure and restoration of law and order,
and (3) reconstruction of the economy and government system. The first
phase was completed by April 2005. The second phase began around April
2005 and was expected to last for around two years. The third phase was
expected to take around three to five more years (BRR and International
Partners 2005).7
The relief efforts conducted by both domestic and international organi-
zations provided great physical and financial assistance. It should also
be noted, however, that local people were obliged to depend on their
own resources during the first couple of days after the disaster. This
fact underlines the importance of establishing strong and resilient local
communities.
Funding
The international focus on victims of the Aceh tsunami as well as the Nias
earthquake continued well beyond the initial relief period. The Paris Club
of creditor nations at its meeting in Paris on 12 January 2005 declared
a moratorium on the foreign debt of the tsunami-hit countries. Some
key players in the international aid community, including World Bank

President James Wolfensohn, suggested that debt write-offs would be

preferable to debt deferral. However this proposal was not agreed to on
the grounds that it might raise moral hazard issues: countries absolved of
debt might be tempted to borrow excessively in the future in the expecta-
tion that they would eventually be bailed out if, for some reason, they had
difficulties in meeting repayments. The IMF and World Bank officially
endorsed the moratorium and the major international credit-rating agen-
cies agreed that they would not regard deferral of debt service payments as
a negative factor in their risk assessments and credit ratings. Subsequently,
the IMF and the World Bank also announced considerable debt relief for
the affected countries, particularly the Maldives, Sri Lanka, and Indonesia
(Soesastro and Ace 2005; Economist, 5 February 2005).
Members of the Consultative Group on Indonesia (CGI) at a meeting
convened hurriedly on 19–20 January 2005 agreed to contribute US$1.7
billion in 2005 for the reconstruction of Aceh. Of this amount, US$1.2
billion was promised in the form of grants and the remaining
US$0.5 billion was pledged as soft loans at zero or near-zero interest rates.
Of the US$1.2 billion in grants, only US$0.2 billion was to be distributed
through the Indonesian government. The rest was to be distributed through
non-government organizations (NGOs) (Soesastro and Ace 2005).
In February 2005, the Asian Development Bank (ADB) set up a
US$600 million Asian Tsunami Fund to provide grants for emergency
technical assistance and reconstruction projects. Indonesia was to receive
half of the grant, divided into US$290 million for the Earthquake and
Tsunami Emergency Support Project (ETESP) and US$10 million as the
ADB’s contribution to the Multi Donor Fund (MDF) for Aceh-Nias. The
ETESP was intended to support disaster management, reconstruction and
rehabilitation in affected areas of Aceh and North Sumatra. The sectoral
targets of the grant included agriculture, fisheries, micro and small enter-
prises, health, education, water supply, irrigation, housing, power, roads,
and spatial planning (ADB 2006).
Commitments from various countries, organizations, and private indi-
viduals to support the reconstruction effort were considered generous.
For example, Australia agreed to provide financial support amounting
to about A$1 billion. A$500 million was expected to be in the form of
grants and A$500 million in soft loans over the period 2005–10. According
to records maintained by the BRR, 78 countries, 30 organizations, and
many individual donors pledged support (both grants and soft loans)
of around US$6.1 billion in total by November 2005. The total amount
given through direct private contributions was quite large; according to
some estimates, this amounted to US$2.5 billion out of the total donor
pledges. In some cases, such as in the United Kingdom, United States, and

Italy, private contributions exceeded government contributions by a wide

margin (BRR and International Partners 2005).
A multi-donor trust fund for Aceh-Nias, the MDF, was established by
the Indonesian government in early 2005. The main goal of this fund was
to attract and pool bilateral and other resources so as to ensure a coor-
dinated approach to the support of rehabilitation activities in Aceh and
Nias.8 Contributions were also expected from the private sector, founda-
tions, and NGOs. The fund was designed to support two types of activities
(MDF 2005):
1. New projects or new components of existing projects, including the

co-financing of existing or new projects supported by multilateral
agencies or other financiers.
2. Assistance for government programs that were part of the rehabilita-
tion and reconstruction efforts.
By January 2006 about 66 per cent of the US$530 million pledges had
been formalized in the form of a contribution agreement and the MDF
had received US$229 million in cash. Disbursements had been made to
seven projects amounting to US$79 million. These projects included land
titling, rural and urban community recovery, housing and settlements,
waste management, and technical assistance to the BRR. By December
2006 the amount provided to the fund had reached US$655 million
with pledges from fifteen donors (Table 4.7). About 77 per cent of these
pledges had been formalized in the form of contribution agreements and
approximately US$480 million had been allocated to 17 projects in four
sectors: recovery of communities, infrastructure and transport, capacity
building and governance, and sustainable management of the environ-
ment. Disbursement to these projects had reached around US$170 million
(http://www.multidonorfund.org/).
The Indonesian government also provided large-scale support for
reconstruction in Aceh and Nias. The 2005 government budget allocation
for reconstruction in Aceh (which included some of the funding received
from international agencies) was approximately US$880 million (Kompas,
27 August 2005) and in 2006 was approximately US$960 million. Over
five years, the total government budget for Aceh’s reconstruction, includ-
ing government loans, was expected to be around US$3–4 billion (Tempo
Interactive, 27 March 2005).
Table 4.8 shows the composition of funding commitments according
to the BRR, for rehabilitation and reconstruction activities until 2009.
This total amount of over US$9 billion, which is much larger than the
initial estimate of damages and losses, reflected an intention to ‘build

Table 4.7 List of pledges through multi donor fund (MDF) as at

December 2006
Pledges (US$ million)

European Commission 253
Netherlands 174
United Kingdom 72
World Bank 25
Sweden 20
Denmark 18
Norway 18
Germany 14
Canada 11
Belgium 10
Finland 10
Asian Development Bank 10
United States of America 10
New Zealand 9
Ireland 1
Total Contributions 655
Source: http://www.multidonorfund.org/, accessed 18 May 2007.
Table 4.8 2005 composition of funding commitments for rehabilitation

and reconstruction to 2009
US$ billion
Domestic sources through the government budget 3.0
Foreign governments 3.6
Private sector and NGOs 2.5
Total 9.1
back better’ in Aceh and Nias. By the end of 2005, around US$4.4 billion
had been allocated to specific projects (BRR and International Partners
2005).
FOUNDATIONS FOR RECOVERY
As noted earlier, the Indonesian government responded to the disasters in

three main phases: emergency rescue and relief; rehabilitation and resto-
ration of law and order; and longer-term reconstruction of the economy

and government systems. Because of the difficult economic and politi-

cal conditions of Aceh and the sheer magnitude of the destruction of its
infrastructure, the first phase of crisis management took much longer than
expected.
There were three main concerns regarding the activities in the rehabilita-
tion phase. The first was the need to coordinate the activities conducted
by the very large number of official and other agencies active in the field.
The Indonesian government appointed the national planning agency,
Bappenas, as the central agency for developing recovery planning for the
tsunami-affected areas. The main challenge for Bappenas was to develop
a master plan that satisfied all of the main institutions working in the
province. For a considerable time, dialogue between Bappenas on the one
hand, and local governments in the region on the other, was rather limited.
Lacking direct involvement in much of the planning process, many local
governments felt that they had been excluded from the reconstruction
process by the central government. As a result, local governments had
drawn up programs that in some cases were incompatible with Bappenas
plans. At times, this led to duplication of activities and the inefficient uti-
lization of funds.
There were also cases of poor coordination of activities between NGOs
and Bappenas. Many NGOs resisted accepting plans that were drawn up
exclusively by Bappenas. Indeed, several groupings of NGOs prepared
their own reconstruction programs for Aceh although it was not clear
how they intended to relate these plans to those of Bappenas or local
governments.
In these difficult circumstances the Indonesian government decided to
establish an entirely new agency to coordinate recovery activities. However
local governments, communities, and private sector firms as well as NGOs
were not very keen on this approach. They were worried that this new
agency would add an additional layer of bureaucracy to the problems of
working in Aceh. They were also concerned that construction work would
be tendered in Jakarta and would be won by large construction companies
with good connections to high-ranking officers in the central govern-
ment and that the implementation of these activities would be conducted
without proper attention to the needs of local people. Local communities
and NGOs pressed for a more decentralized approach (Athukorala and
Resosudarmo 2005).
A second concern related to security conditions in Aceh. The three
decades of conflict between the GAM and the Indonesian government had
held back development and had severely limited the flow of news out of
Aceh, to other parts of Indonesia as well as to the rest of the world. For
example, it was not until 28 December 2004 – two days after the tsunami

– that most of Indonesia and the rest of the world knew how badly the
tsunami had hit Aceh. In contrast, news of the scale of the disaster in Sri
Lanka and Thailand reached the international media almost immediately.
Poor roads and telecommunications also made it difficult to provide
speedy assistance to many villages along the coast of Aceh. Additionally,
there were worries that the ongoing political conflict would hinder recon-
struction operations.
A third concern was to ensure that commitments pledged by interna-
tional donors would materialize in a timely way. For various reasons
beyond the control of Indonesian officials, there was a risk that some of
the commitments would never translate into actual aid flows. It is also
true, however, that there were limitations on Indonesia’s ability to absorb
aid quickly. For these and other reasons, it soon became clear that it was
necessary for Indonesian officials and local NGOs to work effectively with
donors to minimize mismatches between donors’ interests, on the one
hand, and local reconstruction priorities on the other (Athukorala and
Resosudarmo 2005).
The Master Plan
The central government seemed to understand the need for more effec-
tive coordination with local governments and NGOs as well as for a
more decentralized approach to the reconstruction effort. From March
2005 onwards, Bappenas conducted intensive consultations with com-
munity and political leaders in the affected areas as well as with NGOs
and donors. Syiah Kuala University in Banda Aceh was given assistance
to organize input from local communities into the consultation process
while central and local government line agencies also provided expertise.
Donors were encouraged to contribute suggestions. The Master Plan
that resulted was comprehensive and the central government helpfully
recognized that no one plan could address every issue likely to arise in the
rehabilitation process.9
Nevertheless, despite the extensive consultations, many local com-
munities and NGOs reacted negatively to the Master Plan. Many local
communities felt that their aspirations had not been properly reflected. In
response, as a conciliatory gesture only a couple of days after his inaugu-
ration in April 2005, the new Head of the BRR, Dr Kuntoro, agreed that
many aspects had not been adequately dealt with. He indicated that the
BRR would not follow the Master Plan to the letter and that rather, it
would be used as a reference document in a flexible way (Kompas, 3 May
2005). The local Head of the BRR in Nias also agreed that the Master Plan
was not necessarily a suitable strategy for redevelopment in Nias (Kompas,

19 August 2005). It was therefore soon agreed that an evolutionary

approach would be adopted and that there would not be any single rigid
‘blueprint approach’ to the process of reconstruction (Indrawati 2005;
World Bank 2005). For example, under the new approach, communities
were to be provided with opportunities to participate in decision-making
about where, how, and by whom houses and other buildings were to be
reconstructed. The central government would concentrate on the provi-
sion of principal infrastructure facilities.
Earlier plans that had outlined regulations for tough zoning, manda-
tory setbacks from the sea, relocation of local markets, and so on, were
set aside. Leaders in Jakarta committed themselves to ensuring that local
people in Aceh and Nias were involved in making decisions about such
matters (Sen and Steer 2005). In this way, disagreements between the
central government on the one hand, and local governments and commu-
nities on the other, were kept to a minimum. If the reconstruction process
in Aceh ultimately turns out to be successful over the long term there is a
strong likelihood that this pattern of strong collaboration between stake-
holders will be adopted as the blueprint for regional development in other
parts of Indonesia.
The Aceh-Nias Rehabilitation and Reconstruction Agency (BRR)
The central government preferred to set up a special Aceh-Nias

Rehabilitation and Reconstruction Agency as a one-stop shop for the
coordination of all agencies and donors in Aceh and Nias. There was no
strong objection from local governments, communities, NGOs, and inter-
national donors to this decision. There were two main reasons for this.
First, the central government had shown that it was willing to collaborate
with local stakeholders as well as donors in developing the Master Plan
and to be flexible in implementing the plan. Second, the person appointed
to head the BRR, as well as the deputies, had a reputation for being ‘clean’
and capable.
In April 2005 the government embarked on the second phase of recov-
ery operations. On 16 April 2005, the government established the Badan
Rekonstruksi dan Rehabilitasi (BRR) Aceh-Nias, with the stated mission
of restoring livelihoods and strengthening communities in Aceh and
Nias by overseeing a coordinated, community-driven reconstruction and
development program. Initially, the BRR was established as a coordinat-
ing rather than executive agency to operate for a four-year period. It was
based in Banda Aceh, with a branch office in Nias and a representative
office in Jakarta. Operationally, the BRR comprised three bodies: the
Executive Agency (Badan Pelaksana or Bapel), the high-level Advisory

Board (Badan Pengarah), and the Supervisory Board (Badan Pengawas).

At the end of 2005, the BRR received an additional mandate to build
around 120 000 houses in Aceh and Nias starting in 2006. With this
mandate, the BRR to some extent took over responsibilities earlier given
to the Ministry of Public Works (Tempo Interaktif, 26 December 2005).
The Executive Agency (Bapel), commonly referred to by the term
BRR, was the body responsible for managing the reconstruction and
rehabilitation activities. The BRR had four main offices and several
regional offices. This structure was much leaner than in the initial period
of its establishment. The BRR had an Advisory Board chaired by the
Coordinating Minister for Political and Security Affairs. This board
consisted of 17 representatives from central and regional governments,
religious and adat (local custom) institutions, and other participants
from civil society. It was responsible for ensuring that the aspirations of
agencies and groups that they represented were reflected in the BRR’s
operational planning. The Supervisory Board, meanwhile, consisted of
nine members appointed by the President. It was made up of commu-
nity representatives and technical advisers, including representatives of
donor organizations. This board was responsible for ensuring that the
reconstruction and rehabilitation activities were carried out effectively
in a manner corresponding with the needs of local people (Kuncoro and
Resosudarmo 2006).
Peace Agreement
One of the few unexpected benefits of the bitter wind brought by the
tsunami was a new willingness among political disputing parties in Aceh to
cease military hostilities, and later to begin negotiations. The Government
of Indonesia and the GAM understood that a peace treaty was an essential
part of a successful reconstruction process in Aceh. A series of talks was
conducted to bring about the process.
Facilitated by the former President of Finland, Martti Ahtisaari, GAM
and Indonesian government officials commenced talks in February 2005
and signed an official peace agreement just six months later on 15 August
2005. The agreement, set out in a Memorandum of Understanding (MoU)
signed in Helsinki, provided for the cessation of all hostilities between the
Government of Indonesia and the GAM. Key points of the agreement
included the following (World Bank 2006a):
● The Government of Indonesia and GAM would cease all hostilities;

to this end, the Government of Indonesia would withdraw non-local
military and police forces from Aceh by the end of 2005.

● GAM would decommission all arms, demobilize its 3000 troops,

and surrender 840 weapons.
● The Government of Indonesia would facilitate the establishment of
Aceh-based political parties.
● Aceh would be governed under a new special law and would be
entitled to 70 per cent of revenues from its natural resources.
● GAM members and political prisoners would be granted amnesty.
● A human rights court and a truth and reconciliation commission
would be established.
● An Aceh Monitoring Mission (AMM) would be established by the
EU and ASEAN.
Following the agreement, GAM surrendered all weapons and the

Government of Indonesia withdrew all non-local military and police by
the end of 2005. The EU and ASEAN oversaw the disarmament process
by establishing the Aceh Monitoring Mission. A presidential decree was
later issued granting amnesty to GAM members in exile in other countries
and about 1400 GAM members were released unconditionally from jails.
The Government of Indonesia agreed to facilitate the formation of a local
political party, which would participate in the election of local regional
government representatives (World Bank 2006a, 2006b).
To reintegrate ex-GAM personnel into the community, the Indonesian
government agreed to provide assistance in both cash and kind. Each
ex-combatant and released prisoner was to receive Rp5 million support
(around US$500) in the form of cash and in kind from the Indonesian
government. It was estimated that around 3000 ex-GAM combatants and
1400 political prisoners would receive this support.
At the implementation stage, the planned package for former combat-
ants was changed due to difficulties in providing rigorous proof of eligibil-
ity. Hence, the Government of Indonesia distributed three rounds of Rp1
million per person (around US$100) of livelihood assistance as a form of
minimum social security.
In reality, as reported by the World Bank, the actual amount received
by each former GAM member was much less, often only around
Rp170 000–260 000 (US$18–30). This is because ex-GAM leaders included
orphans and widows in their calculation of who should receive support,
resulting in a greater number of people claiming assistance. The process of
allocating the amount of money involved local people and was relatively
transparent so that in general this approach was accepted without trouble
(World Bank 2006a).
The peace agreement, nevertheless, had several immediate side effects. It
refuelled efforts to form new provinces in Aceh by sub-dividing Aceh into

several separate provinces. Since early 2000 various groups had aspired to
form new provinces within Aceh. The two most favoured new provinces
were Aceh Leuser Antara (consisting of Aceh Tengah, Aceh Tenggara,
Aceh Singkil, Gayo Lues, and Bener Meriah districts) and Aceh Barat
Selatan (consisting of Aceh Barat, Aceh Selatan, Simeulue, Aceh Barat
Daya, Aceh Jaya, and Nagan Raya districts). The symbolic declaration of
these two new provinces was made by several local government officers,
local parliament members, and informal leaders in these eleven districts
before thousands of supporters in Jakarta on 4 December 2005 (Kompas,
6 December 2005 and 14 August 2006).
The central government, however, was ambivalent about these plans to
establish new provinces. Law 32 of 2004 on Regional Government allowed
for the formation of new administrative units, although, in practice, the
exact mechanism involved was not clear. In various interviews officials
from the Ministry of Home Affairs said that consideration of the division
of current Aceh into new provinces still had a long way to go. The provin-
cial government of Aceh also maintained an ambivalent position delaying
recommendations to the central government for the formation of the new
provinces. Moreover, the ex-GAM activists who supported the Helsinki
MoU were also opposed to the division of Aceh into several provinces
because the Helsinki MoU states that the borders of Aceh correspond to
those of 1 July 1956, and as such constitute the current province of Aceh.
This reluctance may also be seen as a way for ex-GAM activists to main-
tain useful bargaining power.
On 11 December 2006, almost two years after the tsunami, for the first
time in Indonesian history the Acehnese people voted to directly elect their
own governor and district/municipality heads. The election process was
widely judged as successful. There were no major conflicts, the division of
Aceh did not become an issue, and the participation rate was very high.
Interestingly, a prominent ex-GAM member, Irwandi Yusuf, won the
election to be Governor of Aceh from 2007 to 2012. The success of this
election and the fact that an ex-GAM member was able to win the election
were promising signs that the peace agreement might eventually lead to a
truly peaceful and democratic environment in Aceh.
REHABILITATION, RECONSTRUCTION AND

RECOVERY
The BRR commenced operations in May 2005 and began to implement the
agreed plans for rebuilding housing, infrastructure, and livelihoods. The
BRR followed the sequence of emergency and recovery activities shown

Level of activity
Emergency
Physical and social

infrastructure
Housing
te
Lo
ia ng
ed
er
m
ter
Im
m
Livelihood and
business
2005 2006 2007 2008 2009
Source: BRR and International Partners (2005).
Figure 4.4 Sequencing emergency and recovery
in Figure 4.4. The plan was that the intensive relief operations that began
in early 2005 would be wound down by mid-2005 and formally ended in
mid-2007. The main priority in the early period was to be house building.
House building activities were expected to peak at the end of 2006 and be
completed by the end of 2007. The second priority in the early period was
rebuilding livelihoods. Rebuilding infrastructure would take longer – only
limited activity was expected until 2006, but the activity was then expected
to intensify rapidly and become the main priority from mid-2006 onwards.
The process of rebuilding livelihoods and infrastructure was expected to
be mostly complete by the end of 2009.
Land Titles
Significantly, the tsunami changed much of the physical landscape in some

parts of Aceh. Not only were houses destroyed but worse, in many places
boundaries and reference marks of land simply disappeared. Although
regarded as less tragic than losing family members, the loss of land is one
of the greatest blows that can befall an Acehnese family. For many people,
land is their most valuable physical asset. In many cases, the legal documents
of ownership were lost after the disaster. The changes the tsunami made
to the contours of the landscape in some places further complicated claims
of land ownership. There was also a risk of land-grabbing. In urban areas
land-grabbing was more likely to affect the more vulnerable groups: women,

children, and orphans. Because of all these concerns, tsunami survivors were
sometimes seen installing markers on land where they believed their house
had stood. In contrast, problems with land titles were much less serious in
Nias. The earthquake in Nias caused houses to collapse but proprietary land-
marks were unchanged. Where difficulties for individuals were concerned,
land title problems in Nias were limited to the loss of legal documents.
Looking to the future, the protection of land rights is a high priority.
Land rights provide the foundation for spatial planning, compensation,
and long-term economic development. Indeed, already there have been
some important cases where reconstruction activities have been delayed
because people in the affected area were not satisfied with the arrange-
ments under which ownership rights to land had been assigned for con-
struction activities.
In response to this serious problem of land ownership, a US$28.5
million Multi-Donor Fund project for the Reconstruction of the Aceh
Land Administration System (RALAS) was launched in August 2005.
RALAS had two major components: first, the reconstruction of property
rights and the issuance of land titles, and second, the reconstruction of a
land administration office in Aceh. The project, executed by the National
Land Administration Agency (Badan Pertanahan Nasional or BPN),
was designed to identify land ownership and to issue land titles through
establishing a community land inventory, recovering land records, and
establishing a land database. The original aim was to issue around 600 000
land titles by the time the project finished in 2008. In the event, by 2009
somewhat less than half of this target was achieved (http://www.multi
donorfund.org/).
Project implementation was expected to take place in several stages.
First, community land mapping would be arranged, facilitated with the
support of NGOs. After that, a team from BPN would arrange adjudica-
tion procedures that measured the land parcels and validated ownership
and boundary demarcations. BPN would then issue public notifications of
adjudication, and provided there were no objections, BPN would subse-
quently issue the land titles. Under the RALAS project all services were to
be provided free of charge.
The first supervision team fielded in November 2005 observed that
progress had been slow. The team noted that there had been delays on
the part of the Indonesian Ministry of Finance in signing regulations
for the waiver of taxes and other charges relating to the issuance of land
titles. However the supervision team remained optimistic that the 2006
targets would still be met. The team also noted that the first component of
RALAS was more advanced than the second. By end of 2006, about 17 400
land titles had been signed and 134 300 land parcels had been measured

Table 4.9 Location of internally displaced persons (IDP) and ex-IDP as

at September 2005, Aceh and Nias
As at September 2005 Aceh Nias

Still internally displaced families 48 181 8 729
No longer internally displaced and: 66 721 62 585
* Already obtained a house 7 147 5 003
* Still not obtained house 59 574 57 582
so they:
* Return to old house 41 882 40 485
* Contract and rent 8 541 1 670
* Stay with family/relative 6 433 6 532
* Stay in an official house 5 262 724
Source: Authors’ own calculation using data from SPAN (2005).
(BRR and Partners, 2006). This was certainly an achievement, demon-

strating that local communities can effectively resolve such problems at
grass roots level (UNORC 2006).
Housing
Major housing rehabilitation, resettlement of displaced people, and resto-

ration of basic utilities only began in mid-May 2005. According to SPAN
2005 data, around 66 700 displaced families (almost 300 000 IDPs) in Aceh
and around 62 600 (around 340 000 IDPs) in Nias had returned to their
areas by September 2005 (Table 4.9).
However in Aceh only around 7000 families (who were no longer
considered internally displaced) and around 5000 families in Nias had
received new houses by this time. Most of the others (around 59 000 fami-
lies in Aceh and 57 000 families in Nias) returned to their old properties
even though their houses had not yet been renovated or rebuilt. For these
people the first priority was to reclaim their properties and then wait until
it was their turn for their houses to be rebuilt or renovated. Many families
had to rent houses or stay with relatives.
During the second half of 2005 building activity gathered pace. The BRR
estimated that by October 2005 around 10 000 houses had been built, by
December around 16 000, by April 2006 around 42 000, and by December
2006 around 57 000 had been completed. However, although activity acceler-
ated in 2006, the number of houses completed was expected to be well behind
the BRR target of 90 000–100 000 houses completed by the end of 2006.

Table 4.10 Rough estimates of costs of labour and housing materials in

Aceh and Nias, 2004–06
Cost End Mid- Early Oct Change

2004 2005 2006 2006 (%)
Aceh
Labour Rp 000/day 30 40 50 50 67
Wood Rp million/m3 1.0 1.5 1.9 2.2 120
Cement Rp 000/50 kg 20 26 34 37 85
Sand Rp 000/3 m3 150 300 300 300 100
Red Brick Rp each 250 580 700 700 180
Wall Paint Rp 000/25 kg 66 75 90 110 67
Wood Paint Rp 000/litre 22 27 32 34 55
Nias
Labour Rp 000/day 40 40 50 50 25
Wood Rp million/m3 1.2 1.6 1.8 2.0 67
Cement Rp 000/50 kg 22 27 34.5 37 66
Sand Rp 000/3 m3 150 150 300 300 100
Red Brick Rp each 400 600 700 1 000 150
Wall Paint Rp 000/25 kg 90 90 125 135 50
Wood Paint Rp 000/litre 22 25 25 38 73
Note: Change in the percentage increase in prices is from end 2004 to Oct 2006.
Source: Authors’ own market survey.
The total estimated budget committed by donors and the Government

of Indonesia for housing was almost US$976 million. Initially the BRR
estimated that the cost of building a 36 square-metre house was around
US$3000. Meanwhile, compensation to rehabilitate damaged houses
varied, but for planning purposes the upper limit was also set at US$3000.
With this figure in mind, it was estimated that the total committed funding
for housing would be enough to build or rehabilitate around 200 000
houses (BRR and International Partners 2005).
However there were significant cost escalations. By the end of 2005 it
was reported that the cost of building a new 36 square-metre house had
increased to around US$5000 (BRR and International Partners 2005).
Table 4.10 illustrates the significant increases in building costs compared
to the situation before the disasters. Consequently, by early 2006, the BRR
revised their estimate of the cost of a new 36 square-metre house to around
US$4000 (BRR and International Partners 2005).10
Why did construction costs rise after the tsunami? The issue of cost
increases is an important one because reports from other places in the

world hit by more recent disasters (Pakistan, the US following Hurricane

Katrina, and even in Yogyakarta in Indonesia after the earthquake in
2006) indicate that sharp cost increases in disaster zones are not unusual.
But unusual or not, it is important to establish whether the cost increases
reflected plausible economic factors or, instead, unacceptable profiteer-
ing. Looking at the components of construction costs in an effort to find
answers, it is notable that increases in labour costs in Aceh and Nias
were not as markedly high as the increase in prices in some other mate-
rial inputs. It seems, therefore, that the supply of labour was apparently
more elastic than the supply of materials. One likely reason for this is that
the peace agreement in Aceh quickly led to an improvement in the secu-
rity situation in the region. Hence, workers from elsewhere in Indonesia
were apparently willing to move to Aceh for only small premiums over
their existing wages. In addition, North Sumatra, adjacent to Aceh, is a
relatively labour-abundant region; it became the main source of outside
labour for reconstruction in Aceh. Nias, on the other hand, never had a
serious security problem. The main issue affecting the supply of labour
there was the ease of transportation to the island after the reconstruction
began. It appears that the reconstruction efforts attracted outside labour-
ers to take up work in Nias.
At first glance, a large increase in the price of timber is surprising given
that Indonesia, and Sumatra in particular, is well endowed with forest
resources. The BRR estimated that the housing reconstruction activities
would need about 1.5 million cubic metres of timber. Many observers
estimated that this amount could easily be supplied from normal domes-
tic timber production supplemented by drawing on seized illegal timber
stocks held by the Indonesian government as well as small amounts of
imported timber and supplies provided by donor countries. However, it is
now thought that the significant increases in timber prices were probably
related to difficulties in accessing the stocks of seized illegal timbers and in
using imported and donated timbers. Further, from the outset there was a
consensus among the BRR, donors and NGOs that reconstruction activi-
ties in Aceh and Nias would only use legal timber, and where possible
would only use timber available locally or from elsewhere in Indonesia
(Jawa Post, 27 December 2006). This attitude introduced legal and admin-
istrative bottlenecks that restricted the supply of timber in the short-run.
Moreover, the legal status of the stocks of seized illegal timbers needed to
be clarified before the timber could be released for use in Aceh. Similarly,
criteria establishing the amount of timber that could be imported and the
guidelines for the use of timber provided by donor countries needed to be
established. Reflecting general concerns about these issues, there has been
a call for serious efforts from the government to legalize the use of illegal

timbers so that they could be utilized immediately. The matter was not
as straightforward as it might seem since there were valid concerns that
the legalization of illegal timber might encourage further illegal logging
because of the possibility of legalizing this product.
It may seem surprising that the supply of other building material inputs
has not been more elastic. Construction activities in other parts of the
country since the 1997–98 Asian economic crisis were relatively slug-
gish compared to the situation before the 1997 crisis and it is likely that
there was excess capacity in other regions. But even if inputs for house
reconstruction can be accessed relatively easily elsewhere in Indonesia, it
takes time to physically move materials and for labourers to arrive. There
were, therefore, practical constraints on the rate at which housing could
be supplied. Realistically, the upper limit of housing construction achiev-
able was probably significantly lower than the original BRR target of
90 000–100 000 houses by the end of 2006.
Livelihoods
Efforts to rehabilitate livelihoods involved several activities. First, steps

were taken to restore the agriculture and fishery sectors through revital-
izing agricultural and plantation land, rebuilding ports, and replacing
lost fishing boats. Second, microfinance, other forms of cheap credit, and
assistance were made available for small and medium enterprises. Third,
employment programs such as cash-for-work and training programs were
developed (BRR and International Partners 2005).
By December 2006 the BRR reported that approximately 50 000 hec-
tares of agricultural land had been restored (around 70 per cent of the total
area damaged). In the fishery sector about 4400 boats had been replaced
and around 6800 hectares of fish ponds had been repaired (approximately
30 per cent of the total area of fish ponds damaged) (Table 4.6).
The information available on how many livelihood activities needed to
be rehabilitated and created, however, is not very clear. Table 4.4 indicates
that more than 260 000 people in Aceh and 85 000 in Nias lost their sources
of income. But it is also important to note that unemployment and poverty
were serious problems in Aceh and Nias before the disasters.
SPAN 2005 data indicates that in September 2005 around 46 per cent
of the population in Aceh above the age of ten was engaged in some form
of employment while around 10 per cent was unemployed (Table 4.11).
Of those who worked, around 49 per cent were self-employed (Table 4.12)
which is common in the informal sectors. Approximately 14 per cent in
Aceh of those who were working were unpaid workers, most likely family
members involved in family businesses. Around 15 per cent of IDPs and

Table 4.11 Employment activity of the population aged 10 years and over
as at September 2005, Aceh and Nias (’000 people)1
Still IDP* Ex-IDP Total for Never Total

by Sept. 05 IDP and been
ex-IDP IDP
Aceh:
Employed 65 98 163 1277 1440
% 39 41 40 47 46
Seeking work† 18 17 35 148 183
% 11 7 9 5 6
Available for 14 11 25 112 136
work†
% 8 5 6 4 4
In school or 68 112 180 1162 1342
taking care of
children
% 41 47 44 43 43
No answer 2 3 5 24 28
Total Aceh 166 241 407 2723 3130
% 100 100 100 100 100
Nias:
Employed 20 152 171 156 327
% 57 62 61 66 63
Seeking work† 3 11 14 8 22
% 8 4 5 3 4
Available for 1 6 7 4 11
work†
% 3 2 2 2 2
In school or 11 78 89 69 158
taking care of
children
% 32 32 32 29 31
No answer ... ... ... ... ...
Total Nias 34 245 281 237 518
% 100 100 100 100 100
Notes:
1
During the week prior to the survey.
* IDP 5 internally displaced person.
†
The description ‘seeking work’ refers to people who report that they are actively looking
for work. The description ‘available for work’ refers to people (sometimes referred to
as ‘discouraged workers’) who are not actively seeking work but who report that they
would be available to work if jobs were available.

Table 4.12 Occupational status of the population aged 10 years and over
as at September 2005, Aceh and Nias (’000 people)1
Still IDP* Ex-IDP Total among Never been Total

by Sept. 05 IDP & Ex-IDP IDP
Aceh:
Self-employed 34 48 82 621 702
with no assistant
% 52 49 50 49 49
with temporary
or unpaid labour
assistant
% 5 5 5 11 10
Employer 6 6 12 45 56
% 9 6 7 4 4
Employee 18 31 49 264 313
% 28 32 30 21 22
Unpaid worker 3 6 9 188 197
% 4 7 6 15 14
No answer 1 2 3 19 22
Total Aceh 65 98 163 1277 1440
% 100 100 100 100 100
Nias:
with no assistant
% 60 54 54 58 56
with temporary
or unpaid labour
assistant
% 9 11 11 11 11
Employer ... 1 1 1 2
% 1 1 1 1 1
Employee 1 11 13 9 22
% 7 8 7 6 7
Unpaid worker 4 39 43 37 80
% 21 26 25 24 24
No answer ... 2 3 3 5
Total Nias 20 152 171 156 327
% 100 100 100 100 100
Note:
1
During the week prior to the survey.
* IDP 5 internally displaced person.

ex-IDPs were unable to find any employment, suggesting that reconstruc-

tion activities in the early post-disaster period were not able to generate
employment for significant numbers.
Overall, around 300 000 jobs in Aceh and around 30 000 in Nias needed
to be created, certainly a challenging task. By April 2006, the BRR
reported that around 148 000 people had received some skill training to
enable them to re-enter the job market and that more than 41 000 farmers
had been assisted to return to their fields (BRR 2006). By December 2006,
the BRR claimed that around 69 per cent of the male and 36 per cent of
the female labour force in urban areas as well as around 68 per cent of the
male and 45 per cent of the female labour force in rural areas of both Aceh
and Nias was actively engaged in some form of work (BRR and Partners
2006). Nevertheless, reliable data on how many of the people who were
unemployed in mid-2005 actually obtained some form of employment is
not available.
School and Health Services
In the aftermath of the disasters around 2000 school buildings needed to

be rebuilt and approximately 2500 teaching positions needed to be refilled
(Table 4.6). It should be noted that there was a serious shortage of teachers
in Aceh even before the tsunami. By December 2006, the BRR reported
that around 750 school buildings had been built and approximately 5400
teaching positions had been filled. In other words, in terms of school
buildings, only around 40 per cent of the target had been reached but the
number of teachers now exceeded pre-tsunami levels, thus partially allevi-
ating the teacher shortage (BRR and Partners 2006).
In rebuilding the education system in Aceh and Nias, besides taking into
account the damage caused by the disasters it is important to understand
local needs. Table 4.13 shows the numbers of children and young adults
who had never been to school and those who had dropped out. Around
23 000 young persons aged 7 to 24 years in Aceh and around 31 000 in
Nias had never been to school. Table 4.14, furthermore, shows that among
those who had left education, around 50 000 in Aceh and 30 000 in Nias
had not obtained any elementary education degree. Thus, considering the
low elementary school attainments and the low attainments at higher edu-
cational levels, even if the elementary schools and teacher numbers were
restored to pre-disaster levels they would still fall well below those needed
to rebuild a better Aceh and Nias.
In the health sector, by December 2006 324 hospitals and health
centres had been rebuilt. This far exceeded the number of hospitals and
health services damaged by the earthquakes and tsunami. It should be

Table 4.13 Educational status of the population aged 7–24 years, Aceh
and Nias, 2005 (’000 people)
Age Never Not in In school No answer Total

attended school any
school more
Aceh
7–12 12 14 514 2 542
% 2 3 95 ... 100
13–15 2 34 238 1 275
% 1 12 87 ... 100
16–18 2 98 169 2 271
% 1 36 62 1 100
19–24 6 370 8 4 389
% 2 95 2 1 100
Total 23 516 929 9 1477
% 1 35 63 1 100
Nias
7–12 9 5 105 ... 118
% 7 4 89 ... 100
13–15 4 11 37 ... 52
% 8 21 71 ... 100
16–18 6 24 23 ... 53
% 11 45 44 ... 100
19–24 12 59 8 ... 79
% 15 75 10 ... 100
Total 31 99 173 ... 302
% 10 33 57 ... 100
said that health facilities before the disasters were in a state of neglect
and the need for health facilities has substantially increased in the
aftermath. Approximately 63 000 people in Aceh and Nias suffered
some mental problems following the disasters. Although reconstruction
activities were underway, the risk of communicable disease outbreaks
remained high. Looking at household sources of drinking water and
sanitation facilities (Tables 4.15 and 4.16), it can be seen that access to
piped water in Aceh and Nias had been very limited and relatively few
households had septic tanks.11 Moreover, many people were still living
in shelters. With the majority of people in Aceh depending mainly on
wells for drinking water, it was important to monitor the water quality
of these wells.

Table 4.14 Educational status of children and young adults no longer in

education, Aceh and Nias, 2005 (’000 people)
Age Not gradu- Gradu- Gradu- Gradu- Gradu- No Total

ated from ated from ated from ated from ated from answer
elemen- elemen- secondary high university
tary School tary school school school
Aceh
7–12 10 5 ... 14
% 67 32 1 100
13–15 8 21 5 ... 34
% 23 61 16 ... 100
16–18 11 37 36 14 ... 98
% 11 38 37 14 ... 100
19–24 22 103 105 127 13 1 370
% 6 28 28 34 4 ... 100
Total 50 165 146 141 13 1 516
% 10 32 28 27 3 ... 100
Nias
7–12 4 1 ... 5
% 82 18 ... 100
13–15 5 5 1 ... 11
% 45 50 5 ... 100
16–18 7 11 5 1 ... 24
% 30 45 20 5 ... 100
19–24 14 22 12 10 1 ... 59
% 24 38 20 17 1 ... 100
Total 30 39 17 11 1 ... 99
% 30 40 17 12 1 ... 100
Infrastructure
Towards the end of 2005 USAID signed an MoU with the Ministry of
Public Works to reconstruct 240 kilometres of road from Banda Aceh
to Meulaboh. Phase 1 of the project (80 km – connecting Banda Aceh
to Lamno) was expected to be completed by August 2006. Phase 2 of the
project, the remaining 160 kilometres, was expected to take another two
or more years. Meanwhile, the Japan International Cooperation Agency
agreed to rehabilitate the existing 122 kilometre road from Calang to
Meulaboh (BRR and Partners 2006).
Moreover, the Asian Development Bank agreed to finance the reha-
bilitation of another main route, a 490 kilometre road connecting Banda

Table 4.15 Main household sources of drinking water as at September

2005, Aceh and Nias (’000 households)
Still IDP Ex-IDP Total for Never Total

Ex-IDP IDP
Aceh
Piped water 2 14 16 75 91
% 12 22 20 10 11
Pump/well 9 36 44 556 600
% 63 54 55 72 70
Spring 2 4 6 103 109
% 12 6 7 13 12
Bottled water 1 7 7 10 17
% 4 10 9 1 2
Other 1 6 7 34 41
% 9 8 9 4 5
Total 14 67 80 778 859
% 100 100 100 100 100
Nias
Piped water ... 3 3 1 4
% ... 5 5 1 3
Pump/well 1 22 24 19 42
% 40 36 36 31 34
Spring 1 33 34 31 65
% 51 52 52 52 52
Bottled water ... ... ... 6 6
% ... ... ... 9 5
Other ... 4 4 4 8
% ... 7 7 7 6
Total 3 63 65 60 125
% 100 100 100 100 100
Aceh with North Sumatra. Overall, the total road length needing to be
rehabilitated or built in Aceh following the disaster was around 3000 kilo-
metres (Table 4.6). Nias, naturally, did not need as many roads as Aceh
(BRR and International Partners 2005).
Besides roads, the BRR also indicated that 14 seaports, 11 airports and
air strips, 120 arterial bridges, and around 1500 minor bridges needed to
be rebuilt (Table 4.6). Compared with progress in other sectors, infra-
structure reconstruction was relatively slow. The BRR reported that

Table 4.16 Household sanitation facilities as at September 2005, Aceh

and Nias (’000 households)
Still IDP Ex-IDP Total for Never Total

Ex-IDP IDP
Aceh
Toilet with septic 4 28 32 221 253
tank
% 31 42 40 28 29
Toilet without septic 1 7 8 125 134
tank
% 10 11 11 16 16
Pond/river 3 9 12 186 198
% 20 14 15 24 23
Directly on cesspool 1 5 6 117 123
% 9 8 8 15 14
Yard/bushes/forest 3 13 16 104 120
% 21 19 19 14 14
Other 1 4 5 25 31
% 9 6 7 3 4
Total 14 67 80 778 859
% 100 100 100 100 100
Nias
Toilet with septic ... 4 4 3 7
tank
% ... 6 6 5 5
Toilet without septic 1 15 16 15 31
tank
% 24 24 24 25 25
Pond/river ... 11 12 9 21
% ... 18 18 15 17
Directly on cesspool ... 11 11 11 23
% ... 17 17 19 18
Yard/bushes/forest 1 11 11 10 22
% 24 18 18 17 17
Other ... 11 11 11 22
% ... 17 17 19 18
Total 3 63 65 60 125
% 100 100 100 100 100

around 1200 kilometres of roads in Aceh and 300 kilometres in Nias had
been built or repaired as at December 2006. Further, 14 ferry terminals
and harbours, 8 airports and airstrips, and 158 bridges had been restored
(BRR and Partners 2006). The types of problems which caused slow
progress in this area can be illustrated by an example. The construction
of the road from Banda Aceh to Meulaboh experienced serious delays.
Issues concerning land acquisition and poor weather were mentioned as
the main reasons for the delay (USAID 2006). As far as land acquisition
was concerned, significant differences emerged between the kind of road
that local people wanted and what USAID wanted to build. USAID
planned to build a highway with seven-metre carriageways and two-metre
shoulders. Locals, however, not only feared speeding traffic but also
wanted to be able to sell snacks and tea from stalls along the roadside
(New York Times, 9 October 2006). The dilemma was an interesting one.
While, as noted earlier, the Indonesian government had been willing to
set aside the Master Plan and follow a more bottom-up approach by
taking into account local voices, some donors seemed to be committed to
a top-down approach.
CHALLENGES
At the end of 2006 there were four main challenges facing the reconstruc-
tion and rehabilitation process. The first arose from the unrealistically
high community expectations generated by the various statements and
pledges from government leaders, NGOs, donors, and others. Local com-
munities had come to expect not only to have their houses rebuilt and their
livelihoods restored but also to participate in reconstruction activities. It
was hoped that expectations could be managed by focusing on reasonable
targets although the BRR’s operational approach did not yet provide for
this.
The BRR’s budget realization for the 2005 and 2006 fiscal years was
quite low. This was the second challenge faced in the reconstruction
process. The third challenge related to issues of coordination and com-
mitment. As a coordinating agency, the BRR needed to establish smooth
coordination arrangements with local governments and donor agencies.
The relationship with local governments was pivotal to spending monies
effectively while the relationship with donor agencies was vital to ensure
that aid commitments were implemented efficiently. Finally, there was the
challenge of establishing a viable exit strategy for the BRR. The mandate
of the BRR extended until 2009. By then it was expected that the BRR
would have arranged the transfer of the whole redevelopment process to

local governments. There was, therefore, a challenge for both the BRR
and local governments in handling the transition processes well.
The following sections elaborate on these four challenges.
Managing Expectations
The ambitious plans for reconstruction and rehabilitation in Aceh and

Nias created high expectations. During the initial emergency stage, local
inhabitants witnessed the arrival of large-scale support from both govern-
ment and non-governmental organizations alike. Figure 4.4 indicates a
peak of activity in the early stage which was much more intensive than
the more sustained work carried out later in the recovery stage. But as the
diagram shows, there was a risk of a lull in activity when the emergency
stage scaled back to a lower intensity because there was no guarantee that
the housing recovery stage would kick in quickly. A lull of this kind did
indeed occur and was seen by many people as reflecting inactivity on the
part of the BRR. A ‘slow start’, which is the term some observers used in
referring to the first year of BRR operations, was a polite judgement com-
pared to the views expressed by others who cynically translated BRR as
baru rapat-rapat (just hold meetings).
For the Acehnese in general and the people of Nias in particular, the dis-
asters aroused expectations of significant improvements at the local level.
Development in these areas had long lagged behind development else-
where in Indonesia. People in these regions felt marginalized and isolated
from the national development process, economically as well as politically
– in Aceh because of the long socio-political conflict, and in Nias because
of the separation from Sumatra and the remoteness of the island.
The establishment of the BRR in 2005 led to considerable excitement
among the local populace in Nias. Many people imagined that they would
take part in the reconstruction process following the plans set out by the
agency. Who would the BRR recruit if not locals who know the region
well? It has to be acknowledged that in Indonesia the sentiment of putera
daerah (local people) was still important in isolated areas. Local people
were therefore very disappointed to find that their involvement in the
administration of the BRR in Nias was quite limited.
In the case of Nias, the irony is that for non-locals, an assignment to
Nias was generally regarded as a punishment rather than a promotion.
In the first six months of the operation of the BRR branch in Nias, only
one out of twelve heads of BRR working units lived on the island. This
problem was remedied in early 2006 when the heads of BRR working units
were instructed to live in Nias.
Local businesses and contractors in Aceh and Nias were also excited

by the prospect of involvement in BRR projects. Most local contractors,

however, were disappointed to find that in practice they were unable to
participate in the construction projects. The reason for this, they reported,
was that the procurement procedures and requirements set down by the
BRR for redevelopment construction were so complicated that local con-
tractors were effectively excluded from participating.
Finally, the BRR’s target of building around 92 000 houses in Aceh and
Nias during 2006 – which, added to those built in 2005, amounted to a
target of around 108 000 houses in total by the end of 2006 – raised special
expectations. Although restoration of the housing stock was justifiably
seen as the main priority, the feasibility of this target was questionable
from the start, even allowing for the fact that the size of the new homes
was expected to be small (only 36 square metres). Typically, the number of
new homes constructed nationwide in Indonesia was only around 60 000
per annum. In the absence of any decline in house construction elsewhere,
the BRR target implied an increase of roughly 150 per cent in the output of
the national housing construction industry, a very ambitious target.
Even with the relatively modest rate of construction achieved in 2005 in
Aceh and Nias, wages in the construction industry and the price of build-
ing materials increased during the year at levels higher than elsewhere in
Indonesia (BRR and International Partners 2005). Adhering closely to
such an ambitious target thus ran the risk of encouraging the lowering of
construction standards, and this implied that the much-publicized oppor-
tunity to ‘build back better’ would be missed. Moreover, the heavy addi-
tional demand for timber, if not carefully managed, threatened to hasten
deforestation in Aceh and other parts of Indonesia.12
Nevertheless, BRR officials declared themselves confident of meeting
the housing targets and mentioned the following considerations in support
of their optimism. First, after a delay of some months in its establishment,
the agency had generally been able to demonstrate leadership in the recon-
struction effort and hence had been able to encourage major participants
to focus their efforts on housing. Second, the BRR was able to modify the
Master Plan stipulations, where appropriate, after consultations with local
communities. This pragmatic approach worked to overcome a number
of conflicts between the perceived interests of local communities and the
constraints of the Master Plan on housing programs. Third, most prob-
lems of land identification had been solved through the RALAS project.
Fourth, the central government and the GAM agreed to end their thirty
years of conflict on 15 August 2005. The result was that the general level
of safety in Aceh improved greatly allowing reconstruction activities to
be conducted in a conducive environment. Fifth, the BRR’s special new
authority, which allowed for the implementation of housing projects

through direct contracting, helped to offset delays in other government

agencies responsible for building houses, such as the Ministry of Public
Works. Finally, funds for reconstruction activities began to flow smoothly
(Kuncoro and Resosudarmo 2006). In spite of this optimism by the BRR,
however, it should be noted that, judging by the number of houses built
by November 2006, it seemed highly unlikely at the time that the housing
target would be achieved. Delays in reaching targets, in turn, risked weak-
ening the credibility of the BRR as a reliable reconstruction partner in the
region.
There was a quite widespread view that the BRR should put more
emphasis on the quality of reconstruction – that is, maintaining house
construction as its main priority but without committing itself to ambi-
tious numerical targets – while meanwhile ensuring that all those waiting
to receive new housing were properly accommodated in comfortable tem-
porary living conditions. Arguably, there should also have been stronger
emphasis on supporting the restoration of livelihood activities through
provision of suitable fishing boats, support for farming activities (such
as the provision of seeds), repair of the relevant infrastructure, and so on
(Kuncoro and Resosudarmo 2006).
BRR Spending
As at September 2006, spending by the BRR had lagged well behind

budget (Table 4.17). Underexpenditure of this kind threatened to lead to
widespread dissatisfaction among local people. The inability of the BRR
to achieve its reconstruction targets was reflected in the planned budget for
BRR operations. Indeed, for the 2005 budget, the BRR’s fiscal year was
extended up to 2006. Thus, during January–September 2006, there were
two fiscal budgets running.
However, even after the extension of the fiscal year, the level of budget
spending was still very low. Out of Rp4 trillion (around US$410 million)
allocated in the 2005 budget for the BRR, only 63 per cent was spent.
Moreover, the higher spending areas appear to have been on administra-
tive activities related to offices, planning, and programming.
There was a sharp increase in the BRR budget for 2006.13 The main
reason for this was that, beginning in 2006, the BRR received an addi-
tional mandate to implement housing construction in an effort to speed
up activity in this sector following the earlier disappointing performance.
The agency was provided with additional funding of Rp4 trillion (around
US$430 million in this case) to build up to 40 000 houses during the year.
Mainly because of this initiative, the budgeted expenditure for the BRR
in 2006 was set at around Rp10 trillion (around US$1 billion), an increase

Table 4.17 BRR’s budget realization, as at 30 September 2006 (old format)
2005 % of % of % of 2006 % of

Budget Plan realization realization realization Budget Plan realization
(Rp billion) by 12/2005 by 04/2006 by 09/2006 (Rp billion) by 09/2006
Total budget 3 967 10 63 63 9 618 18

(US$ million approx.) (410) (1 050)
By sectoral specification
Planning and programming 90 0 73 73 176 22
Institutional 770 4 47 46 1 063 14
Housing, infrastructure, and land use 1 619 10 67 68 5 613 17
111
coordination
Economic and business empowerment 546 5 73 73 1 065 23
Religious, social, and cultural 271 3 55 55 358 30
Health and education 480 30 56 56 1 115 17
Secretariat, Nias branch, finance, and 191 26 82 83 228 26
communication
By types of expenditures
Personnel 372 47 82 n.a. 269 n.a.
Equipment 744 7 53 n.a. 1 461 n.a.
Capital 2 147 5 54 n.a. 5 602 n.a.
Social support 704 12 89 n.a. 2 286 n.a.
Source: BRR website, http://www.e-aceh-nias.org/home/, accessed 15 May 2007.
7/10/10 15:38:33
of over 150 per cent of its budget for 2005. It was not clear, however, that
this approach would be successful. As a new agency lacking experience in
managing large-scale construction projects at the time, it was uncertain
whether the BRR would able to implement this daunting new task more
successfully than the other organizations involved. Moreover, this major
additional spending program risked further constraining the capacity of
the BRR to coordinate other reconstruction programs. Perhaps of great-
est concern at the time however was whether, having such a large budget,
the BRR could avoid the taint of mismanagement. There was expected to
be considerable local pressure on its officials to engage in corrupt behav-
iour. It was realized that if they succumbed to this pressure, the ability
of the BRR to continue to lead the reconstruction effort would quickly
diminish.
Data up to 30 September 2006 suggest that expenditure outcomes
throughout the financial year remained well behind target (Table 4.17).
While a slow start in 2005 was perhaps understandable, the continued
underspending raised concerns about the ability of the BRR to deliver on
the promises that had been made. Nine months into 2006 only about 18
per cent of the budget had been spent. The challenge for the BRR in the
remaining months therefore was important.
What can be said about these problems? First, from the point of view
of the local people, the spending delays were most unfortunate. In 2005
alone, actual spending reportedly lagged behind planned expenditures by
about Rp2.8 trillion (around US$290 million), the bulk of which reflected
underspending in the areas of housing, infrastructure, and land use coor-
dination. One widely mentioned reason for spending delays was said to be
the BRR’s commitment to careful management of project procurement
activities. This explanation, however, was not well received at the local
level. What the locals knew was that they had not received the things that
were promised to them by the BRR. People still living in barracks felt that
they should have been able to move into permanent housing, and fishers
and farmers felt that their operations should, by this stage, have returned
to normal. Second, this continuing underexpenditure begged the question
of whether the BRR would be able to execute planned budgets into the
future.
What were the policy options? First, the BRR could perhaps have
tried to speed up spending in the last three months of the fiscal year
2006. The danger was that quality would be compromised for the sake of
quantity. Worse, the emphasis on careful project procurement might be
compromised. Alternatively, the BRR could have asked for a technical
extension of the 2006 budget into the next year. However, the Indonesian
government would have been unlikely to agree to this because it would be

Table 4.18 BRR’s budget realization, as at 28 December 2006 (new

format)
2005 % of 2006 % of
Budget Plan realization Budget Plan realization
(Rp billion) by 12/2006 (Rp billion) by 12/2006
Total budget 3 967 63 10 553 74
(US$ million approx.) (410) (1 150)
By sectoral specification
Finance and planning 57 77 72 82
Institutional and 770 47 1 028 53
human resources
Infrastructure, 1 244 61 2 416 87
environment, and
maintenance
Housing and 408 82 4 355 75
settlement
Economic and 546 73 843 70
business
Religious, social, 213 57 277 82
and cultural
Health, education, 538 55 1 143 64
and women’s
participation
Secretariat 191 83 390 65
Source: BRR website, http://www.e-aceh-nias.org/home/, accessed 15 May 2007.
reluctant to accept the idea that budget extensions were a normal way of
doing business.
The BRR seems to have preferred the first option. In the last three
months of 2006, the BRR spent around 60 per cent of its total budget of
Rp10.55 trillion for 2006 (Table 4.18). In order to speed up spending the
BRR explored the idea of decentralizing expenditure authority to local
BRR offices across Aceh and Nias. For example, starting in April 2006
the BRR experimented with the idea of placing a liaison officer at the
local level by creating joint secretariats with local governments in Nias.
The secretariats were given a wide range of duties including coordinat-
ing activities carried out by stakeholders, sharing information on the
progress of recovery activities, involving local governments in the recov-
ery process, and assisting local governments with the management capac-
ity to be professional lead agencies for development activities. Additional

liaison officers were appointed in seven or more regional offices by the

end of 2006.
This innovation seems to have helped to accelerate the housing and
infrastructure development program. It was hoped that more decisions
would be made at the local level under this approach. In 2005 some 90 per
cent of BRR staff members were in Banda Aceh. However it was planned
that the proportion of staff in the central Banda Aceh office would go down
to just 50 per cent by 2008. By gradually shifting the decision-making and
management to district and local town authorities across Aceh and Nias, it
was expected that the BRR’s role would be reduced mainly to monitoring,
countering corruption, problem solving, gap filling, and donor relations.
But another option that perhaps should have been given more
consideration – which is also a very effective form of decentralization –
was the establishment of a much larger program of direct cash transfers.
If this approach had been adopted, households would have received cash
and would have been able to organize building and rehabilitating their
houses themselves.
The international donor community, too, had naturally been important
in all of these activities. But unfortunately little public information was
readily available regarding the expenditure programs of donors. There
were no comprehensive reports easily available at the time on how much
the international donor community had spent. It would have been par-
ticularly interesting to know how much had been spent on the ground
in Indonesia and how much, in contrast, donors had spent on their own
administrative activities. In the future, more accountability on the part of
donors is clearly needed.
Coordination and Commitments
Developing effective coordination within the BRR, between the BRR and
local governments, as well as between the BRR and other organizations
was a continuing challenge.
The three key structures within the BRR itself were the Executive
Agency, the Advisory Board, and the Supervisory Board. The question
of how these three bodies might interact efficiently so that the BRR as a
whole could be effective had been a major issue ever since the establish-
ment of the BRR in early 2005.
Since the early days of the BRR, the Executive Agency had shown flex-
ibility, choosing to follow the Bappenas Master Plan when practical but
being ready to modify it when necessary. However the definition of ‘prac-
tical’ was not clear. There was no agreement on this matter between the
Executive Agency, the Advisory Board, and the Supervisory Board. There

was a perception that the Executive Agency could do whatever it wanted,

even though the Advisory and Supervisory Boards may have had different
views. Even within the Executive Agency itself there was no clear guidance
on this for staff. The result was a lack of consistency in operations. Some
directors followed the stipulations of the Master Plan – even when doing
so was problematic – on the grounds that abandoning the Plan would be
tantamount to ignoring the law because it was embodied in a presidential
decree (Kuncoro and Resosudarmo 2006).
Thus by the end of 2006, there was a growing view that the role of
the Supervisory and Advisory Boards needed to be strengthened. There
were also some calls to reevaluate the original Master Plan with the aim
of removing the parts that created problems, simplifying others, and
strengthening those that were important – particularly those relating to
land use planning. The hope was that a revised version of the Plan might
then provide guidance that would be followed both by the BRR and by all
other institutions contributing to the reconstruction effort (Kuncoro and
Resosudarmo 2006).
BRR coordination with local governments was rather weak in this early
period. Initially, local governments expected that the BRR would help
them implement local priorities. However, the local governments lacked
comprehensive rehabilitation plans so the BRR devised its own plan and
spent considerable time in 2005 establishing offices and learning about
local problems. This approach did not work very well. Local governments
felt that they already had sufficient knowledge about local concerns and
were furious over what they regarded as a late start by the BRR. The
weak coordination between the BRR and local governments should not
be attributed to a lack of commitment. There were many meetings and dis-
cussions. However, the different organizations just did not relate to each
other very well. As noted in the publication of BRR and International
Partners (2005):
[m]ost meetings, ostensibly for coordination, achieved little more than

information-sharing rather than strategic planning [and] . . . agency leaders
were so busy on their own programs that they were frustrated when they
attended a meeting that wasn’t useful . . . [so that] they were likely to send junior
staff in future, so reinforcing the information rather than strategy content.
The result was that local Bappeda kabupaten (district) and kota (munici-
pality) agencies did not align their 2006 regional budgets with the BRR’s
2006 plan. Indeed, many regional governments complained that they did
not know what the BRR planned to do in their regions.
The BRR also struggled to develop relations with other agen-
cies involved in the Aceh-Nias reconstruction activities although, in

Transport
Flood control & irrigation
Environment
Energy
Communications
Housing
Other infrastructure
Fisheries
Agriculture & livestock
Water & sanitation
Education
Enterprise
Governance & administration
Community, culture & religion
Health
–300 –200 –100 0 100 200 300
Source: BRR and International Partners (2005); Kuncoro and Resosudarmo (2006).
Figure 4.5 Gaps between funding and minimum requirements

(US$ million)
general, the BRR was able to take the lead in management. The strug-
gle was evident in several areas. First, there were significant imbalances
within the various components of the rehabilitation effort between the
minimum requirements and the available funds. Figure 4.5 shows the
difference between total current commitments of funding by government
and donors in each sector and the minimum funding requirements. It
can be seen that funding far in excess of actual needs was allocated to
areas such as health, culture and religion, governance and administra-
tion, enterprise rehabilitation, education, and water and sanitation, while
energy supply, the environment, flood control and irrigation works,
and transport were significantly under-funded. The BRR, therefore,
had trouble in persuading donors to reallocate funding from excessively
funded to under-funded sectors. Another example of the BRR’s limited
ability to coordinate the recovery effort was that several of the NGOs
involved were not able to deliver the outcomes they had promised, par-
ticularly in relation to housing construction and provision of income
earning opportunities.
Second, it was not clear that the BRR had the ability to ensure that
commitments by international and domestic donors would materialize
in a timely manner. Some commitments appeared likely to not translate
into actual fund flows for various reasons beyond Indonesia’s control.
Indonesia’s capacity to absorb aid was also an important factor. It was

clearly vital that the BRR aimed to maintain effective communication with
donors and engaged donors in developing activities so as to minimize any
mismatches between donors’ interests and reconstruction priorities.
Exit Strategy
It is important that reconstruction programs following a natural disas-

ter should fit into broader programs of economic development for the
affected regions. The plan was for the mandate of the BRR to end in
2009. The question of the BRR’s exit strategy was therefore a matter
of some interest. Figure 4.4 suggested to some that the agency should
start phasing out its activities by mid-2008. For housing, the target was
to finish rebuilding by mid-2007. The dotted lines at the far right of
Figure 4.4 suggested that the BRR would plan to leave certain activi-
ties for other agencies. Indeed, the expectation was that at the end of its
term, the BRR would hand over the resources it had been using to local
governments (at both the provincial and district or municipality levels),
which would be expected to continue reconstruction and development
activities.
Sustainability, then, was an issue that needed to be considered. First was
the sustainability of the development process initiated by the BRR. In its
operations, the BRR introduced procedures and practices that appeared
in some cases to be different from the operational procedures currently
in use by local governments. It was important, therefore, that the BRR’s
governance systems could be implemented by local governments while
at the same time allowing for different local values and cultures. During
the period to end-2009 when the BRR was expected to cease operations,
the BRR and local governments needed to plan to work together to find
governance systems that, given the local context and capability, were
workable and acceptable to local people. Second, the BRR initially acted
as a focal point for various budgetary matters including the coordination
of funds from donor agencies. In many instances, the BRR matched local
needs with possible funding from both national and international donor
agencies. This task required understanding and sensitivity to local needs
on the one hand, and on the other called for effective networking and
good diplomatic skills to liaise with donors and upper level governments.
It was expected that as 2009 approached, the BRR would increasingly
share its knowledge and information about financial networks with local
governments.
The issue of an exit strategy certainly emphasized the need for close
communication between the BRR and local governments across Aceh and
Nias.

CONCLUSION
This chapter has discussed progress in the reconstruction and rehabilita-
tion of Aceh and Nias in the first two years following the greatest natural
disaster in recorded Indonesian history. On the economic front, the
December 2004 earthquakes and tsunami severely affected the livelihood
of hundreds and thousands of people in the region. Furthermore, despite
large-scale reconstruction activities, in the two years following the disas-
ter many people were unable to find jobs. Moreover, the region was also
affected by relatively high inflation partly caused by the reconstruction
process itself.
Notably, the various stakeholders in the reconstruction process were
virtually unanimous in claiming that progress had been too slow. Many
reconstruction plan targets were not met in the first two years and it
appeared likely that achievements would continue to tend to fall short of
targets. Budget expenditures had fallen well behind targets as well, even
though a four-month extension of the 2005 fiscal year was agreed to
with the aim of providing leeway in implementing activities. Late reali-
zation and non-realization of the 2006 budget were no less worrying – a
mere 18 per cent of spending had taken place up to the end of September
2006.
Several observations may be made about this slow progress. Effective
coordination among agencies, both domestic and foreign, is essential.
Ideally, the BRR as a coordinating agency needed to operate in close col-
laboration with local people, local governments, and donor agencies. When
there was inadequate consultation and coordination, reconstruction pro-
grams tended to be delayed, parties involved lacked a sense of ownership
towards the various activities, and the risk that different agencies would
operate at cross-purposes increased. A second issue related to the overall
financing needs of reconstruction. It became increasingly apparent that in
the longer term, unanticipated and large cost increases in reconstruction
activities were likely to produce a funding gap that would need to be met
one way or another if reconstruction work was to be completed.
In one respect at least, the awful natural disasters brought some ben-
efits to the conflict-ridden region of Aceh. Three decades of political and
military conflict before the tsunami had caused widespread suffering in
the province. Peace talks had commenced before the tsunami but progress
had been slow. The natural calamity put sharply renewed pressure on the
parties to the peace negotiations to reach early agreements on key issues so
that reconstruction activities could proceed smoothly. In short, suddenly
the great majority of people in the region were united in their demand that
there be peace.

But looking back over the experience in Aceh in the first two years
after the disaster, the nagging question remains: how can Indonesia best
prepare to cope with natural disasters in the future? It seems clear that
in a developing country such as Indonesia, disaster management should
start with local society, at the local level. In this context there are two
main lessons to learn. First, it is important to improve local early warning
systems across the nation and to increase awareness of the local indica-
tions that a natural disaster might be about to occur. Indeed, as noted
above, local knowledge of some of these indications currently exists
among some traditional community groups in Indonesia. As a country
prone to natural disasters, Indonesia should acknowledge the great
importance of disseminating such traditional knowledge throughout the
country by, for example, including the topic of natural disasters in the
national curriculum beginning at the elementary school level (Kompas,
12 October 2006). Second, it is important to note that community self-
reliance is vital in a society facing severe natural disasters, especially
during the critical first hours following a disaster. It is inevitable that
outside help will take time to arrive, especially in remote areas. Indeed,
by the time that news of the disaster has been reported on the national,
and especially the international media, it is often the case that many of
the injured have already died. And, of course, international agencies also
need to improve their ability to respond much faster and much more effi-
ciently to disasters in developing countries.
As a last observation, it should be emphasized that reconstruction after
a natural disaster poses numerous difficult challenges. Close coordina-
tion between all of the agents involved is essential, as is a peaceful socio-
political environment and active community involvement in program
implementation. Further, it is important that there are no false promises
of assistance so that local people have realistic expectations about the
speed of reconstruction work. Targets should be realistic, significant cost
increases must be expected and budgeted for, and plans should reflect
a sensible approach to the sequencing of programs. In particular, from
the very beginning, rebuilding economic livelihoods and housing recon-
struction should be seen as top priorities. Strategies must be developed
to ensure that there is efficient coordination among different agencies,
that commitments of assistance from both domestic and international
organizations are fulfilled, and that those agencies are accountable for the
promises that they have made. Finally, reconstruction agencies should
set out clear exit strategies to allow for a smooth transfer of activities
into the hands of local governments and organizations at the end of the
reconstruction period.

NOTES
1. Suahasil Nazara and Budy P. Resosudarmo were primarily responsible for this chapter
which draws on Nazara and Resosudarmo (2007).
2. This is based on records maintained by the World Health Organization’s Center for
Research on the Epidemiology of Disasters at the Université Catholique de Louvain,
Brussels. To be included in this WHO database of natural disasters, a disaster should
fulfil at least one of the following criteria: (1) ten or more people reported killed, (2) 100
people reported affected, (3) a call for international assistance, or (4) a declaration of a
state of emergency.
3. See http://www.em-dat.net
4. The census was conducted by BPS, Bappenas, and UNFPA (with the help of the inter-
national donor agencies CIDA, AusAID, and NZAID) in response to the need for
accurate demographic data after the disasters in Aceh and Nias. BPS, the main agency
conducting the field survey, must be congratulated on this achievement for several
reasons. First, the census was prepared very quickly. By comparison, for example,
preparations for the 2010 Indonesian National Census were already being made in
2006. Second, the challenges involved in conducting a population census in the post-
disaster area of Aceh and in the remote areas of Nias were enormous. These included
security challenges in several conflict regions of Aceh. Third, BPS was able to include
all people in Aceh and Nias in the census. The actual work, in the form of instrument
finalization, started in June 2005, and the census date as the reference for the data was
set as 15 September 2005. In addition to collecting demographic data at the time of the
reference date, the census also collected data on internally displaced persons (IDPs)
defined as persons that, due to a natural disaster, had to leave their usual dwelling.
These IDPs could be located in tents, ruined houses, or other family houses.
5. In a triangular procedure, any information obtained from an interview is used only
when reconfirmed by at least two other respondents.
6. The World Bank’s estimate was based on a standard assessment technique developed
by the United Nations Economic Commission for Latin America and the Caribbean
(ECLAC, 2003).
7. In effect, the third phase was completed in April 2009. The mandate of the BRR for-
mally ended, as scheduled, in April 2009. Ongoing functions were transferred to the
provincial and other regional authorities in Aceh.
8. The MDF is co-chaired by the BRR, the European Commission (EC) as the largest
donor, and the World Bank as the Trustee. The steering committee of this fund com-
prises the Government of Indonesia, contributors, civil society, and other international
NGOs and the UN. The broad representation of the steering committee was expected
to allow the MDF to act as a donor coordination mechanism and a forum for dia-
logue on recovery policy between the Government of Indonesia and the international
community.
9. The Master Plan was released through the President Regulation (Perpres) No. 34/2005
in April 2005. The main book, which was effectively an extended summary of the whole
study, comprised 129 pages. The sectoral information which is the detailed version of
the Master Plan comprised twelve books totalling 1400 pages.
10. BRR might predict that the cost per house only temporarily increased and so the
average cost per house in 2006 would be around US$4000.
11. In Aceh only around 30 per cent of households had toilets with septic tanks. In Nias the
percentage was even lower; i.e., around 6 per cent. Thus a large proportion of house-
holds used toilets without septic tanks or use a pond or river as their toilet.
12. This issue caused considerable controversy. Some local environmental groups argued
that reconstruction activities in Aceh contributed to faster deforestation. See Sijabat
(2007).
13. Table 4.16 shows the old format of BRR’s budget, while Table 4.17 presents the new
format and an additional budget of around Rp1 trillion in 2006.

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Aceh: Bappeda Propinsi Aceh.
BPS (Badan Pusat Statistik) (2005), Statistik Indonesia 2005, Jakarta: BPS.
BPS, Bappenas, UNFPA, CIDA, AusAID, and NZAid (2005a), Penduduk
and Kependudukan Aceh Pasca Gempa dan Tsunami: Hasil Sensus Penduduk
Nanggroe Aceh Darussalam 2005, Jakarta: BPS.
BPS, Bappenas, UNFPA, CIDA, AusAID, and NZAid (2005b), Penduduk and
Kependudukan Nias Pasca Gempa dan Tsunami: Hasil Sensus Penduduk Nias
2005, Jakarta: BPS.
BPS Kabupaten Nias (2005), Kabupaten Nias dalam Angka 2004, Gunungsitoli:
BPS Kabupaten Nias.
BRR (Badan Rehabilitasi dan Rekonstruksi Aceh-Nias) (2006), Membangun
Tanah Harapan: Laporan Kegiatan Satu Tahun Badan Pelaksana Rehabilitasi
dan Rekonstruksi Nanggroe Aceh Darussalam dan Nias April 2006, Banda Aceh:
BRR.
BRR and International Partners (2005), Aceh and Nias One Year after the Tsunami:
The Recovery Effort and Way Forward, Jakarta: BRR.
BRR Nias (2005), ‘Nias Island: rebuilding a better future’, Presentation at the Nias
Stakeholders’ Meeting, Gunungsitoli, Nias, December 2005.
BRR and Partners (2006), Aceh and Nias. Two Years after the Tsunami, Banda
Aceh: BRR.
ECLAC (United Nations Economic Commission for Latin America and the
Caribbean) (2003), Handbook for the Evaluation of the Socioeconomic and
Environmental Impact of Disaster (LC/MEX/G.5), Santiago: ECLAC.
FAO (Food and Agriculture Organization of the United Nations) (2005a), ‘Impact
of the tsunami on fisheries, aquaculture and coastal lives’, FTP.FAO.org/FI/
Document/tsunami, accessed 11 October 2006.
FAO (2005b), ‘Soil salinity problems are limited in tsunami affected countries.
Planting could resume in many areas, but farmers are still facing other con-
straints’, http://www.fao.org/tsunami/stories/, accessed 11 October 2006.
Indrawati, Sri Mulyani (2005), ‘Toward recovery: lessons from Indonesian case in
managing natural disaster crisis’. Keynote speech at the 7th IRSA International
Conference on Natural Disasters’ Impact and Challenges for Recovery, Jakarta,
3–4 August.
Kuncoro, Ari and B. Resosudarmo (2006), ‘Survey of recent developments’,
Bulletin of Indonesian Economic Studies, 42 (1), 7–31.
LPEM (Institute for Economics and Social Research) (2005), ‘Perhitungan
Kebutuhan Dana Pembangunan kembali Aceh’, LPEM Internal Report,
Jakarta.
MDF (Multi Donor Fund) (2005), One Year Report: Results, Challenges, and
Opportunities, Jakarta: Multi Donor Fund for Aceh and Nias.

Nazara, Suahasil and B.P. Resosudarmo (2007), Aceh-Nias Reconstruction and

Rehabilitation: Progress and Challenges at the End of 2006, ADBI Discussion
Paper no 70, June, http://www.adbi.org/discussion-paper/2007/06/29/2288.aceh
nias.reconstruction.rehabilitation/, accessed 10 October 2009.
OCHA (Office for the Coordination of Humanitarian Affairs) (2005), ‘Indian
Ocean – earthquake/tsunami – December 2004: list of commitments/contribu-
tions and pledges as of 21 February 2005’, http://www.reliefweb.int/rw/fts.nsf/
doc105?OpenForm&emid=TS-2004-000147-LKA, accessed 25 October 2005.
Patton, Michael Quinn (2002), Qualitative Evaluation and Research Methods, 3rd
edn, Thousand Oaks, CA: Sage.
Sen, Kunal and L. Steer (2005), ‘Survey of recent developments’, Bulletin of
Indonesian Economic Studies, 41 (3), 279–304.
Sijabat, Ridwan Max (2007), ‘International agencies furthering Aceh deforesta-
tion: greenomics’, Jakarta Post, 11 May.
Soehaimi, A., E.K. Kertapati, Surono, Supartoyo and J.H. Setiawan (2005),
‘Gempa Bumi dan Tsunami NAD-SUMUT 26 Desember 2004’, paper pre-
sented in the GeoSeminar, 14 January, Pusat Penelitian and Pengembangan
Geologi, Bandung.
Soesastro, Hadi and R. Ace (2005), ‘Survey of recent developments’, Bulletin of
Indonesia Economic Studies, 41 (1), 5–34.
SPAN (2005): see BPS, Bappenas et al. 2005a, 2005b.
UNORC (2006), ‘Humanitarian and recovery update: Aceh and Nias, May 2006’,
Jakarta: Office of the UN Resident/Humanitarian Coordinator in Indonesia.
USAID (2006), ‘Audit of USAID/Indonesia’s Banda Aceh-Lamno Road recon-
struction activities under its tsunami recovery and reconstruction program’,
Audit Report no 5-497-06-003-p, Jakarta: USAID.
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North Sumatra 26 December 2004’, http://www.wetlands.or.id/, accessed 30
March 2005.
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review’, Report no. 26191–IND, Poverty Reduction and Economic Management
Unit, East Asia and Pacific Region.
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December 26, 2004 Natural Disaster, Jakarta: World Bank.
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Bank.
World Bank (2006b), Aceh Public Expenditure Analysis: Spending for Reconstruction
and Poverty Reduction, Jakarta: World Bank.

5. Sri Lanka1
The earthquake that caused the tsunami on 26 December 2004 occurred
at 6:59 am Sri Lanka time with the first large wave hitting the east coast at
8:35 am. Within a very short time over 36 000 people were dead (this total
includes the 5644 who remain classified as ‘missing’), and several hundred
thousand had been displaced. Massive damage was also inflicted on thou-
sands of houses and other buildings, railways, bridges, communication
networks, and other infrastructure and capital assets.
Although Sri Lanka had experienced periodic droughts, floods, land-
slides, and the occasional cyclone, in recorded history it had never experi-
enced a tsunami, or indeed any other type of natural disaster of this scale
and magnitude.2 Although the country was completely unprepared for a
disaster of this scale, the relief effort that got underway almost immediately
– initially organized by local communities, followed by the government
and international agencies – was able to feed, clothe, and shelter survivors;
provide the injured with medical attention; and ensure that the thousands
of bodies were cremated or buried, avoiding any disease outbreaks. The
initial response is generally agreed to have been a success despite the
understandable confusion which accompanied this effort at times.
However, as an earlier study of this issue discussed (Jayasuriya, Steele
and Weerakoon 2006), it became clear as the reconstruction and reha-
bilitation phase proceeded that moving from the immediate relief effort to
addressing the massive reconstruction tasks posed a different set of chal-
lenges that was in many ways more complex. The tsunami had come at a
time of deterioration of the macroeconomic environment: GDP growth
was slowing from the second quarter, inflationary pressure had been
persistently building from the middle of 2004, fiscal and external current
account deficits were growing, and the currency was rapidly depreciating.
As explained in the earlier report, the tsunami – paradoxically – brought
a measure of stability to the economy which had been straining under
growing macroeconomic imbalances. For Sri Lanka, as for other affected
countries that were ready to accept external assistance, the promised
international assistance appeared to be more than adequate to cover the
full costs of immediate relief and reconstruction and produced an almost
euphoric (though transient) national mood. In particular, it provided an
123

unanticipated source of foreign capital inflows for the relief and recon-
struction effort and enabled the country to avoid the slide towards a cur-
rency crisis. Not only did the additional influx of foreign capital allow Sri
Lanka to maintain a fairly healthy balance of payments (BOP) during
2005–06, but relief and reconstruction-related expenditures also boosted
GDP growth to a healthy annual average of 6.7 per cent over the same
period.
While the tsunami diverted attention away from the growing structural
imbalances in the economy, the imbalances were not eliminated. As the
reconstruction and rehabilitation phase proceeded – albeit at a slower pace
than initially anticipated – issues regarding the effectiveness with which
resources were mobilized, the effectiveness of delivering assistance and its
coordination, and the gaps opening up in financing reconstruction and its
implications for macroeconomic policy management, took centre stage.
This chapter surveys the relief and reconstruction effort, with the focus
on the first two years. Other issues, in particular the renewal of armed
conflict which culminated in the defeat of the LTTE (Liberation Tigers
of Tamil Eelam) by the government forces in 2009, took precedence in Sri
Lanka’s political and economic agenda. While the reconstruction activi-
ties in the South and Southwest proceeded rapidly and were successfully
completed, progress in the East and Northeast, particularly in contested
areas, was badly affected. In 2008, the World Bank (2008) described the
inequitable distribution of tsunami aid and reconstruction efforts, point-
ing out that the ‘South and the West have received more aid than the
North and the East. In fact, in some Southern districts, more houses have
been rebuilt than were damaged by the tsunami.’ Hence, overall progress
in house construction was heavily skewed towards the South and the West:
‘while 90 per cent of the fully-damaged units in the South and the West
have been reconstructed, only 57 per cent of the units in the North and
the East have been completed’ (p. 17). At the end of 2008, reconstruction
activities were basically completed in the South and the West but in the
North and the East, unfinished tasks remained.
IMPACT OF THE TSUNAMI
The final death toll was estimated at around 36 000. Initial estimates
of those displaced put the number at around 800 000. By mid-2005 this
number had come down to around 516 000 as some of the displaced found
alternative accommodation with friends and relatives. Damage to build-
ings and physical infrastructure was massive. Tens of thousands of houses
were damaged or destroyed, many hotels were severely damaged, and six

Sri Lanka 125
BOX 5.1 IMMEDIATE IMPACT
Killed/missing persons: 35 322

Injured persons: 21 441
Internally displaced persons: 516 150
Widowed, orphaned, affected elderly and disabled persons: 40 000
Lost livelihoods: 150 000 (75 per cent of the total fishing fleet)
Value of lost assets: US$900 million
Houses destroyed: 89 000
Schools destroyed or damaged: 183
Schools used as camps for IDPs: 446
Schoolchildren affected: 200 000
Health facilities destroyed or damaged: 102
Tourism infrastructure damaged:
Large hotels: 53 out of 242

Small hotels: 248
Related small enterprises: 210
Cultivated arable land affected by salinity: 23 449 acres

Note: IDP 5 internally displaced person.
Source: GOSL (2006).
hotels were completely washed away. Close to 200 schools were destroyed
or sustained serious damage. Several hospitals, telecommunication net-
works, and the coastal railway network were also damaged.
The geographic impact of the tsunami was uneven. Much of the coastal
belt of the Northern, Eastern and Southern Provinces and some parts of
the Western Province was severely damaged. The Eastern Province was
particularly hard hit, accounting for nearly half of total deaths and dis-
placed persons as well as numbers of houses damaged (Table 5.1). The
severity of the tsunami disaster in the Northern and Eastern Provinces
compounded problems arising from two decades of conflict between the
Government of Sri Lanka (GOSL) and the LTTE. The majority of an
estimated 360 000 conflict-related internally displaced people lived in these
two provinces. From the very early stages, there were concerns about how
assistance could be channelled to LTTE-controlled areas. However, basic
relief supplies did manage to get through to affected people during the
early phases of the relief effort.

Table 5.1 Key human and asset loss by district/province
District/Province No of No of No of
deaths(a) displaced(a) damaged houses(b)
Galle 4 214 128 077 12 781
Matara 1 342 13 305 7 464
Hambantota 4 500 17 723 4 084
Southern Province 10 056 159 105 24 329
Colombo 79 31 239 5 984
Gampaha 6 1 449 675
Kalutara 256 27 713 6 124
Western Province 341 60 401 12 783
Ampara 10 440 75 238 24 438
Batticaloa 2 840 61 912 17 948
Trincomalee 1 078 81 643 8 074
Eastern Province 14 358 218 793 50 460
Jaffna 2 640 39 907 5 109
Mullaitivu 3 000 22 557 5 556
Killinochchi 500 1 603 288
Northern Province 6 140 64 067 10 953
Total 30 895 502 366 98 525
(a)
Notes: As of January 2005; (b) as of October 2005.
Source: Department of Census and Statistics (DCS).
The preliminary assessment of damages completed by end-January 2005

through a joint effort of the Asian Development Bank (ADB), the Japan
Bank for International Cooperation (JBIC), and the World Bank (WB)
(2005) estimated that Sri Lanka had suffered asset damages of around
US$1 billion (4.5 per cent of GDP), and estimated that the medium-term
financing needs (including immediate relief) would be around US$1.5–1.6
billion (7.5 per cent of GDP). The largest financing needs were in the
housing sector (Table 5.2).3 The destruction of private assets was substan-
tial (US$700 million), in addition to public infrastructure and other assets.
Loss of current output in the fisheries and tourism sectors – which were
severely affected – was estimated at US$200 million and US$130 million,
respectively. Key industrial, agricultural, and metropolitan centres were
relatively unaffected and the damage to capital assets was primarily to the
tourism and fisheries sectors, each of which contributes only around 1.5–2
per cent of GDP.

Sri Lanka 127
Table 5.2 Estimates of losses and needs assessment on reconstruction and

rebuilding (US$ million)
ADB/JBIC/WB(a) GOSL
Losses Needs Feb. 05(b) May 05(c, d)
Housing 306–341 437–487 400 400
Roads 60 200 210 353
Water and sanitation 42 117 190 205
Railways 15 130 77 –
Education 26 45 90 170
Health 60 84 100 100
Agriculture 3 4 10 10
Fisheries 97 118 250 200
Tourism 250 130 58 –
Power 10 67–77 – 115
Environment 10 18 30 30
Microfinance – – 150 157
Other 90 180 239 424
Total (US$ bn) 0.9–1.0 1.5–1.6 1.8 2.2
Sources: (a)ADB, JBIC and WB (2005); (b) GOSL (2005d); (c) GOSL (2005c); (d) MFP (2005),
Budget Speech 2006 (December 2005).
These aggregate figures for financing needs were quite close to the gov-
ernment’s own estimate of US$1.8 billion presented in February 2005,
though there were some important differences at the sector level damage
estimates (GOSL 2005d). Subsequently, the GOSL firmed up the country’s
total investment needs to be US$2.2 billion (GOSL 2005c).4 Some of the
differences between these estimates reflected the government’s more ambi-
tious longer-term plans while the donor assessment was largely geared to
restoring the pre-tsunami situation. In line with the regional variation in
the extent of damages incurred, the largest financing needs were identified
in the East (45 per cent), followed by the South (26 per cent), North (19 per
cent), and West (10 per cent).
IMMEDIATE RESPONSE
In the immediate aftermath of the tsunami, the Ministry of Public

Security, Law and Order set up an operations centre, the Centre for
National Operations (CNO), to handle the response, and the Secretary

to the Ministry was appointed as the Commissioner General of Essential

Services to oversee the coordination of government agencies involved in
rescue and relief. Three task forces were set up to address specific aspects
of the relief effort: the Task Force for Rescue and Relief (TAFRER); the
Task Force for Logistics, Law and Order (TAFLOL); and the Task Force
for Rebuilding the Nation (TAFREN).
While there were hiccups and confusion in organizing the relief, for a
country that had not previously experienced such a disaster, Sri Lankan
institutions responded reasonably well. Essential medical aid, emergency
food, and other relief supplies were mobilized within a day. Temporary
shelter for the displaced was provided in schools, other public and reli-
gious buildings, and tents. Communities and groups cooperated across
barriers that had divided them for decades. Public and private sector
organizations cooperated and organized relief efforts at many levels. Sri
Lanka’s past investments in public health paid off in this emergency: the
broad-based public health system and community awareness of basic sani-
tary and hygienic practices ensured that there were no disease outbreaks.
Once the immediate relief and rehabilitation measures for provision of
food, shelter, clothing, clean water, and sanitary and medical facilities to
affected families had been provided, it was necessary to address commu-
nity needs to cope with the trauma and start rebuilding lives. The initial
provision of cash grants to meet immediate needs included (i) compensa-
tion to the value of SLRs (Sri Lanka Rupees) 15 000 (US$150) for victims
towards funeral expenses; (ii) payment of SLRs375 (US$3.75) in cash and
rations for each member of the family unit per week; and (iii) a payment
of SLRs2500 (US$25) towards basic kitchen equipment. These initial
measures were largely successful, though there were some problems with
lack of coordination.5 Overall, the emergency relief was quite successful in
meeting the immediate needs of the affected people.6
SHORT-TERM ECONOMIC IMPACT
The tsunami struck at a time when the Sri Lankan macro economy was
already under pressure on several fronts, reigniting fears of a slide into
the kind of crisis that was seen in 2001 when the economy contracted
by 1.5 per cent (Table 5.3). On the policy front, there was considerable
unease within the business and investor community about the direction
of economic policy under the new government elected in April 2004. Its
program, with the stated goal of ‘growth with equity’, and a strong empha-
sis on rural economic development, was viewed by sections of the business
and investor community as being populist and interventionist.

Table 5.3 Selected macroeconomic indicators: 2001–06
Unit 2001 2002 2003 2004 2005 2006

GDP US$ billion 15.1 16.4 18.2 19.4 23.2 26.0
GDP growth % 21.5 4.0 6.0 5.4 6.0 7.4
Agriculture % 23.4 2.5 1.6 20.3 1.5 4.7
Industry % 22.1 1.0 5.5 5.2 8.3 7.2
Services % 20.5 6.1 7.9 7.6 6.4 8.3
Investment % of GDP 22 21 22 25 26 29
129
Savings % of GDP 16 14 16 16 17 17
External sector
Exports US$ billion 4.8 4.7 5.1 5.8 6.3 6.8
Imports US$ billion 6.0 6.1 6.7 8.0 8.9 10.2
Trade balance % of GDP 27.3 28.5 28.4 211.2 210.7 212.5
Current a/c balance % of GDP 21.4 21.4 20.4 23.2 22.8 24.9
FDI % of GDP 0.5 1.1 0.9 1.1 1.0 1.7
Official reserves US$ billion 1.3 1.7 2.3 2.2 2.7 2.8
Tourist arrivals ’000 persons 336.8 393.2 500.6 566.2 549.3 559.6
Tourist earnings US$ million 202 250 340 408 356 410
7/10/10 15:38:33
Unit 2001 2002 2003 2004 2005 2006

Fiscal variables
Govt. expenditure % of GDP 27 25 24 23 25 25
Govt. revenue % of GDP 17 16 16 15 16 17
Fiscal balance % of GDP 211 29 28 28 29 28
Govt. debt % of GDP 103 105 106 105 94 93
130
Prices and money
Rate of inflation % 14.2 9.6 6.3 7.6 11.6 13.7
Interest rate(a) % 13.7 9.9 7.2 7.6 10.4 13.0
Broad money (M2) % change 13.6 13.4 15.3 19.6 19.1 17.8
Exchange rate Rs/$ 93.2 96.7 96.7 104.6 102.1 107.7
ASPI(b) 19855100 621 815 1062 1507 1922 2722
(a)
Notes: 2-month Treasury bill rate; (b) All share price index.
Source: Central Bank of Sri Lanka, Annual Report, various issues.
7/10/10 15:38:33
Sri Lanka 131
Economic growth began to slow from the second quarter of 2004 and
ended the year with a growth rate of 5.4 per cent. While the election-related
uncertainties and the ensuing policy vacuum no doubt contributed to the
slowdown in economic activity, some policy weaknesses and the slow pace
of reforms contributed to the lacklustre performance. The most visible,
and potentially the most destabilizing manifestation of weakening macro-
economic management in 2004 was a persistent build up of inflationary
pressure from the mid-year onwards. Inflationary pressure was fuelled on
multiple fronts, not least by the conduct of an expansionary fiscal policy
driven by increased subsidies and transfers.
Domestic imbalances were exacerbated by a ballooning oil import bill
which saw the current account deficit on BOP widening to over 3.3 per
cent of GDP in 2004 (from 0.4 per cent in 2003). This was accompanied
by a deceleration of capital inflows, with long-term inflows to the govern-
ment (consisting primarily of foreign concessional loans) declining by
US$130 million in 2004. Foreign borrowings by the commercial banking
sector increased significantly in 2004 raising the country’s foreign private
debt exposure. The currency depreciated by 8.5 per cent against the US
dollar despite efforts to bolster the exchange rate, which contributed to
the decline in Sri Lanka’s gross official reserves from US$2.3 billion at the
beginning of 2004 to US$1.9 billion by November.
These domestic and external developments led to an acceleration of
inflation from mid-2004, and real interest rates turned negative. Symptoms
of a bubble economy began to emerge: a sharp increase in credit growth
in excess of 20 per cent and a boom in the Colombo stock market unsup-
ported by major indicators of economic fundamentals. The peace process
between the GOSL and the LTTE appeared to have stalled, and with
privatization initiatives shelved concerns over the government’s ability
to reduce the fiscal deficit began to increase. Markets started to get jittery
with the growing realization that fundamental imbalances in the economy
were intensifying. Though the external payments situation improved mar-
ginally in December 2004, rupee depreciation again gathered pace. On 17
December 2004, the currency fell to an historical low of SLRs105 against
the US dollar.
Against this backdrop, the immediate negative impact on output as
measured by the GDP figure was expected to be fairly limited, ranging
from a 0.5 to a 0.7 per cent reduction in 2005 GDP. The relatively small
impact on GDP appeared somewhat surprising given the extent of human
and asset losses. This was not only owing to the fact that only a relatively
small sector of the economy was affected, but also because GDP captures
only the annualized flow of damages to the stock of asset damages, and
spending on relief efforts was expected to have an immediate positive effect

on current GDP. After 2005, the overall impact of reconstruction efforts

certainly helped boost the GDP growth rate.

RECOVERY PHASE
Recovery Targets and Actual Progress
The government planned the reconstruction and rehabilitation phase to

be spread over three to five years (GOSL 2005c). Nevertheless, there were
pronouncements at the political level that all permanent housing needs
would be met within a year. Over time, it has become clear that these were
optimistic pledges. In fact, housing needs, for example, had not been met
fully even by the end of 2006, while reconstruction of damaged schools
and hospitals, and rehabilitation of roads, bridges, and the like was likely
to take longer than envisaged.
Infrastructure
A total of 182 schools and 222 health institutions were affected by

the tsunami. Targets in the education and health sectors included the
reconstruction and renovation of 183 schools, four universities, seven
Vocational Training Authorities, 444 internally displaced person (IDP)
schools (schools used as refugee camps), and the reconstruction and reno-
vation of 102 health institutions.
The pace of recovery, particularly of larger scale infrastructure projects,
was slow with an estimated 50 per cent of construction projects yet to start
by end-2006 (GOSL 2006). By end-2006, 57 per cent of damaged schools
were estimated to be in various stages of construction with only 10 per
cent of projects completed and handed over (GOSL 2006). Similarly, in
the health sector only 55 of a total of 102 damaged buildings had been
completed at the end of two years (Table 5.4).
The bulk of infrastructure damage was to roads and railways (Table
5.5). A total length of approximately 800 kilometres of national road
network and 1500 kilometres of provincial and local government roads
was damaged. The railway infrastructure on a 160-kilometre stretch along
the tsunami-affected coastline was also severely damaged. The target date
for completion of road and bridge reconstruction was set as 2009. As we
shall discuss below, this target date proved difficult to meet because of
serious capacity constraints and cost escalations. The government itself
recognized that the construction industry did not have the necessary

Sri Lanka 133
Table 5.4 Progress in education and health infrastructure
Education Health
No. affected 183 102
Without donors 11 –
Completed 18 55
In progress 105 –
Not commenced 49 –
Table 5.5 Progress in infrastructure
Damage Progress 2006

Water and sanitation 130 projects planned. Donor
commitment for 96 projects
Roads Rehabilitation of 2 projects under way. 8 in tendering
1172 km of roads process.
Bridges 25 major bridges 4 commenced construction; 10 in
tendering process.
Source: RADA (2006).
contractors, equipment, or skilled workforce for such a major reconstruc-

tion effort (GOSL 2005a).
In addition to the rehabilitation of damaged infrastructure, new demands
for infrastructure services were created by relocated communities. As
described in detail later, a significant proportion of relocated households
was found to have inadequate access to water, roads, pre-schools, and
health clinics, and was worse off than before.
Housing
The immediate requirement in housing was to provide ‘transitional’ shel-

ters. A total of around 57 000 transitional shelter units were estimated to
be needed to accommodate 50 per cent of the 500 000 internally displaced
(GOSL 2005a). The remainder of the displaced were assumed to have
received shelter from friends, relatives, and others. Progress on provid-
ing transitional shelters, by and large, was fairly good; by end-2005 over
56 000 units had been completed.7
The total number of displaced persons as of January 2005 was esti-
mated at 98 525 (Table 5.6) of whom 56 000 were in government camps

Table 5.6 Post-tsunami numbers of displaced persons in transitional

shelters
Jan 2005 Dec 2005 June 2006(a) Dec 2006

Government camps 56 000 53 000 42 196 17 083
Private homes 42 525 32 525 32 367 –
Total 98 525 85 525 74 563 17 083
(a)
Note: Post-housing policy revision.
(transitional shelter). The rest were with families/friends (RADA, 2006).

By end-December 2005 the numbers of displaced had dropped to 85 525,
of whom 53 000 were in transitional shelters. This figure was estimated at
around 40 000 by end-2006.
There were significant revisions regarding housing policy. An initial
declaration by the government of a buffer zone between land and sea of
100 metres on the south and southwest coast and 200 metres on the north
and east coast of the country led to the initiation of two types of housing
programs: (i) donor-built housing reconstruction and (ii) home owner-
driven housing reconstruction. No reconstruction of houses (partially or
fully damaged) was to be allowed within the buffer zone. Thus, all affected
households within the demarcated buffer zone were to be provided with
a house built with donor assistance on land allocated by the state while
allowing them to retain ownership of the original land. Households were
not required to demonstrate ownership of the land to qualify for such
assistance.
For those whose damaged houses were deemed to be outside the des-
ignated buffer zone, the government agreed to provide grants and loans
for households to re-build at the same location. In order to qualify for
the entitlement, households were required to prove ownership of the land.
The criteria set down in terms of financing such reconstruction included
an assessment of damages on a points basis where a house deemed to be
more than 40 per cent damaged would qualify for a grant of SLRs250 000
(US$2500) in four instalments, based on progress. A grant of SLRs100 000
(US$1000) was made available to rebuild a house deemed to be less than
40 per cent damaged, disbursed in two stages.
Predictably, the buffer zone became a politically controversial issue
from the very outset. Limits were set in a fairly arbitrary manner, not
taking into account topographical and other relevant features of the land
that would affect hazard risk. There was also dissatisfaction that the rules

Sri Lanka 135
were not to be applied across all building units, with tourist enterprises
being permitted to rebuild within the designated zone. Many of the
tsunami-affected fishers, for example, argued the need to retain land close
to the sea to sustain their livelihoods.
Two household surveys of the tsunami-affected families were carried
out by the Institute of Policy Studies of Sri Lanka (IPS) in 2005 and 2006.
The first survey was carried out in April 2005 (IPS-TS 2005) covering
622 households in six affected districts. The second survey of the same
households was carried out in July 2006 (IPS-TS 2006).8 The IPS Tsunami
Survey (IPS-TS) 2006 results showed that about 60 per cent of surveyed
households thought that the government’s original buffer zone rule was
a ‘good idea’. Data at the Grama Niladari Division (GND)9 level agreed
with this finding; almost all Grama Niladaris (GNs) (village level govern-
ment officers) interviewed agreed that the government’s original buffer
zone policy was ‘good’. Paradoxically, they were also happy with the
relaxation of the buffer zone in 2006. Although there were delays in pro-
viding housing because of the buffer zone rule, most households saw the
prospect of better housing because of this policy.
IPS-TS 2005 results found that most houses that were destroyed were
smaller than the minimum floor area of 500 square feet specified for new
houses under the donor-driven program; in other words, a majority of
households would get superior replacement houses, at least in terms of
floor area.10 Moreover, while all new houses were to be built with perma-
nent housing materials, a large share of destroyed houses had been made
of temporary housing material.11 Also, households that did not have legal
ownership of land were given houses under the donor-driven program.12
These factors may have outweighed the costs incurred by many households
due to delays in housing progress caused by the 2005 buffer zone rule.
But there was widespread popular opposition on many levels to the
buffer zone policy. By end-2005, the government had largely abandoned
the idea of enforcing the buffer zone restrictions. In particular, the scar-
city of land with which to relocate affected households highlighted the
impracticality of enforcing such a zone in the face of the need to ensure
permanent housing within a reasonable period of time. A more relaxed
buffer zone policy was announced in May 2006 along with a ‘Revised
Tsunami Housing Policy’.13 It was essentially aimed at ensuring that all
tsunami-affected people return to their houses or get new houses by the
end of 2006. The policy document promised ‘a house for a house, regard-
less of land ownership’. It defined two zones (not buffer zones)14 and four
housing options, with the cost being shared by the government and donors
(Box 5.2).
The revised housing policy pushed the total housing needs to around

BOX 5.2 REVISED TSUNAMI HOUSING POLICY
1. Government land 1 donor-built house under the donor-driven

housing program primarily for all those who previously lived
within the buffer zone.
2. Government land 1 government cash grant (SLRs250 000)
to construct a new house 1 regulated donor assistance pro-
vided to complete the houses (not less than SLRs250 000
depending on costs to meet the minimum standard house)
through co-financing agreement.
3. Government cash grant (SLRs150 000 for three divisions in
Ampara and SLRs250 000 for Colombo) to purchase land 1
government cash grant (SLRs250 000) to construct a house
1 regulated donor assistance provided to complete (not less
than SLRs250 000, depending on costs, to meet the minimum
standard house) through co-financing agreement.
4. Housing reconstruction grant (SLRs250 000 for fully damaged
homes and SLRs100 000 for partially damaged homes) 1
regulated donor assistance provided to complete only fully
damaged houses as required for meeting the minimum
standard house through co-financing agreement.
110 000 units. The key change was a decision to extend house eligibility to
those without legal ownership of land outside the former buffer zone and to
offer housing to extended family members living in the affected households.
Secondly, in contrast to the earlier policy, the government and donors
were to jointly provide for a minimum of SLRs500 000 (US$5000) cash
support to a tsunami-affected family to build a house. The significant cost
escalation of construction material and labour, already clearly visible by
end-2005, undoubtedly forced a revision of the earlier estimates. Under
the revised policy, the GOSL was to provide the cash grant, initially
reimbursed by different development banks and bilateral donors.15 The
grant of SLRs250 000 (US$2500) each from the government and donors
was to be given in instalments; a first instalment of SLRs50 000 (US$500)
by the government matched equally by the donor and thereafter followed
accordingly. The beneficiary was to receive full title to the property in the
resettlement area (while retaining legal ownership of property within the
re-designated buffer zone).

Sri Lanka 137
Table 5.7 Housing requirements
Original Revised Completed

(2005) (2006) (end-2006)
Homeowner-driven program 55 525 79 184 46 531
Partially damaged 32 497 39 823 34 988
Fully damaged 23 028 39 361 11 543
Relocation Housing Program 43 000 29 830 14 488
Finally, under the donor-built reconstruction program, standard build-

ing requirements were set down by the GOSL of a floor area of 500 square
feet; the donor was to make available common infrastructure for housing
clusters, and the government was to provide services up to the relocation
site. The technical specifications were revised to ensure a more equitable
basis. This was primarily a response to the initial experience where donors
built houses of widely varying quality, with some houses costing only
SLRs400 000 and others being valued at over SLRs1 million (US$4000 to
over US$10 000), causing friction amongst recipients.16
The new housing policy requirements were identified under a
homeowner-driven program and a relocation housing program. Overall,
revisions to the housing policy (involving a higher cash grant component
and a significant increase in the number of housing units deemed neces-
sary) meant that questions would be raised about the ability to meet the
costs of reconstruction within the commitments made by donors. It also
created much confusion amongst the beneficiary households. Only about
a quarter of the households surveyed in the IPS-TS 2006 were clear about
their housing entitlements. Close to 60 per cent indicated that they would
like legal advice regarding their rights as a homeowner.
As of November 2006, 46 531 partially or fully damaged houses had
been rehabilitated, recording an 85 per cent completion rate (Table 5.7).
Nevertheless, a funding gap of US$107 million had been identified to
complete most of the fully damaged houses (GOSL 2006). In contrast
to the progress in the homeowner-driven rehabilitation, progress in relo-
cating tsunami-affected families was much slower at only 50 per cent of
required units having been completed by November 2006. As the target in
this scheme was reduced substantially, the government estimated that suf-
ficient funds were available to successfully complete this program (GOSL
2006).
The lack of clarity regarding housing entitlements and distribution was

Table 5.8 Housing situation as at July 2006 (by eligibility under the 2005
housing program)
Eligibility Rebuilt Relocated Donor Temporary NI(a) Total

built on housing
old site
Donor-driven 52 25 11 175 5 268
% 19 10 4 65 2 100
Owner-driven 76 25 22 26 8 157
% 48 16 14 17 5 100
Not eligible(b) 34 17 24 59 0 134
% 25 13 18 44 0 100
Total 162 67 57 260 13 559
Notes: (a) No information; (b) households not owning a house before the tsunami (70% of
134) and households owning a house on encroached land (30% of 134) outside the buffer
zone were not eligible for a new house under the 2005 housing policy.
Source: Authors’ calculations based on IPS-TS 2005 and IPS-TS 2006 data.
apparent from the survey results. The IPS-TS 2005 and 2006 data give
information on the location of households with respect to the 2005 buffer
zone, and house and land tenure for 559 households. Of these, 268 were
eligible for the donor-driven new housing and 157 were eligible for owner-
driven housing reconstruction. A total of 134 households were not eligible
for a new house either because they were not homeowners before the
tsunami (70 per cent of 134) or because they were outside the 2005 buffer
zone, and were homeowners without land tenure (30 per cent of 134).
The survey found considerable inequities in the distribution of new
houses. Housing progress was worst for people who were actually eligible
for donor-driven new housing. About 65 per cent of such households were
still to be found in temporary housing as of mid-2006. At the same time,
about 56 per cent of households who were not eligible for a new house had
received a house. There appeared to be inconsistencies between official
government policy on housing and actual practice. Some households eli-
gible to relocate under the donor-driven housing program had rebuilt (19
per cent), while others eligible to rebuild under the owner-driven housing
program had relocated (16 per cent). Some households had received houses
outside both these programs, and others who were not eligible to receive a
house under either program had also received houses (see Table 5.8). This
is consistent with the observation by the World Bank (2008) that in some
areas, the actual number of houses built exceeded the number destroyed.

Sri Lanka 139
Table 5.9 Status of housing progress by region (end-November 2006)
Homeowner-driven Relocation
District/Province Requirement Completed Requirement Completed
Galle 11 405 9 590 3 720 2 793
Matara 6 048 5 409 2 120 1 372
Hambantota 1 469 1 344 4 643 4 162
Southern Province 18 922 16 343 10 483 8 327
Colombo 60 53 1 387 107
Gampaha 253 234 436 218
Kalutara 5 290 4 537 2 862 1 687
Western Province 5 603 4 824 4 685 2 012
Ampara 21 347 10 298 3 721 871
Batticaloa 19 499 9 581 2 961 850
Trincomalee 3 635 3 378 2 872 884
Eastern Province 44 481 23 257 9 554 2 605
Jaffna 4 424 1 720 4 257 1 348
Mullaitivu 5 193 387 458 53
Killinochchi 611 0 393 143
Northern Province 10 228 2107 5 108 1 544
Total 79 184 46 531 29 830 14 488
There were coordination problems across various donors, especially

those who provided houses without adhering to government plans.
According to local-level government officials, the reluctance of local non-
government agencies to share information on aid distribution and their
beneficiaries exacerbated the problem of coordination and monitoring.
Table 5.9 confirms the significant regional variation in housing progress
across the country. The uneven progress was, in part, due to the resurgence
of conflict in the north and east of the country from end-2005 (Figure 5.1).
The Eastern Province with the highest requirement of housing lagged well
behind. The survey results were consistent with national data and showed
that housing progress was best in the Southern Province for those outside
the 2005 buffer zone. Less than 6 per cent of surveyed households in this
region were in temporary housing. Housing progress was worst for those
in the Eastern Province – for households both within and outside the 2005
buffer zone. Progress was especially poor for households affected by the
conflict. Progress was fastest in the South. The Western Province lagged

180
160

140
120
100
80
60
No. of houses (cumulative)

40
20
140
0
2005 Jul
2006 Jul
2005 Apr
2005 Oct
2006 Apr
2005 Jan
2005 Jun
2006 Jan
2006 Jun
2005 Feb
2005 Mar
2006 Feb
2006 Mar
2005 Aug
2005 Sep
2005 Nov
2005 Dec
2005 May
2006 May
Month (when rebuilding started or relocated)
rebuilt – conflict affected rebuilt – not conflict affected

relocated – conflict affected relocated – not conflict affected
Source: Authors’ calculations using IPS-TS 2006 data.
Figure 5.1 Survey results on housing progress by effect of conflict
7/10/10 15:38:34
Sri Lanka 141
Table 5.10 Quality of housing before and after tsunami for relocated
households
No Better Worse No
now (%) now (%) difference
(%)
House design 69 42 41 14
Construction materials used for 69 27 49 21
housing
Access to services (water, 69 14 63 20
electricity, road)
Primary school within 1 km 73 10 62 29
Clinic within 1 km 73 1 59 40
Source: Authors’ calculations using IPS-TS 2005 and 2006 data.
behind the Southern Province, most likely due to greater difficulties in

obtaining suitable land but also because of more favourable political
factors operating in the South.
Key reasons cited for the overall slow progress in housing relocation
included a lack of commitment by NGOs, impact of the conflict, lack of
infrastructure in new locations, and poor communications strategies. In
the case of donor housing, it was pointed out that many donors that had
large amounts of funds at their disposal and had pledged to build large
numbers of housing units failed to meet even 50 per cent of their original
targets (GOSL 2006).
These findings are consistent with the survey results: lack of land and
delays in obtaining donor assistance were cited as the main reasons for the
slow progress in the donor-driven housing program. The survey results
also suggested that some people found that they were worse-off in terms of
quality of housing and access to services (Table 5.10). There were claims
that people’s lifestyles were not taken into consideration when designing
the new houses. For instance, the percentage of households using expensive
sources of fuel for cooking such as gas and electricity increased from 10
per cent to 18 per cent, primarily because many of the new houses did not
include a kitchen with a chimney to allow use of firewood for cooking.
The relatively smooth progress of the homeowner-driven housing
program vis-à-vis the relocation program encouraged the Reconstruction
and Development Agency (RADA) to consider converting donor-driven
housing projects to owner-driven programs. Owner-driven housing pro-
grams were reportedly more effective because families got the funds
directly into their own hands.17 Owner-driven housing projects not only

progressed faster but also proved to be cheaper than donor-driven

projects. The cost of a single donor-assisted housing unit was estimated
to range between SLRs0.4 and SLRs1.6 million (US4000–16 000) even
without the additional costs of site preparation, land-filling, drainage, and
infrastructure provision (GOSL 2006).
Considering these factors, RADA urged the international NGOs
(INGOs) to transfer their tsunami reconstruction funds to the Treasury
so that the government could direct funds to the victims. Additional
funding of around US$50 million was needed to shift house construction
previously under donor-driven programs into owner-driven programs
(MFP 2006). RADA argued that this would be the most practical way of
resolving the logistical problems that INGOs faced in constructing houses
themselves. Many donors had concerns about allowing the government to
choose beneficiaries. To address those concerns and to ensure transpar-
ency, it was proposed that donors who opted to convert to the owner-
driven program could be given a list of beneficiaries, so that they could
verify their needs and make payments directly to those families. However,
with the sole exception of the Red Cross (which had complied with the
request to cooperate with the government and converted two-thirds of
their pledges (US$25 million)), INGOs showed no enthusiasm to transfer
funds to the government.18
Escalating costs of building materials and skilled construction labour
may also have contributed to slow progress in housing. All interviewed
key informants reported that the cost of building materials and the wages
of carpenters and masons had increased since the tsunami, with more than
three-quarters stating that construction costs had increased by ‘a lot’.
Livelihoods
An estimated 150 000 people lost their main source of income because of
the tsunami.19 About 50 per cent of these were in the fisheries sector, with
others distributed among agriculture (4–5 per cent), tourism, and small
and micro enterprise-related sectors (GOSL 2005a). In all surveyed dis-
tricts, people received some livelihood support. Types of livelihood assist-
ance included grants in kind (income-generating assets such as fishing
boats and equipment), cash grants, loans, training (vocational, business
support, and the like), cash-for-work, and temporary employment.
According to official sources, around 75 per cent of the affected families
had regained their main source of income by end-2005 (GOSL 2005a).
This was supported by the survey results where 71 per cent of interviewed
households claimed they had regained their previous source of livelihood.
Only 8 per cent of heads of households had changed their livelihood,20

Sri Lanka 143
while 21 per cent were still unemployed.21 Thus, within a year of the
tsunami, most people were back in their previous occupations. However,
this did not mean that people regained their previous level of income.
According to household-level survey data, on average close to 60 per
cent of households considered their real family income – in terms of their
ability to cover basic needs such as food and health – to be lower than their
pre-tsunami income.
There were regional variations in income recovery patterns. Compared
to the Southern Province, a higher proportion of Eastern Province house-
holds felt that they were worse off.22 According to the survey data – in both
the Southern and Eastern Provinces – poor distribution of livelihood-
related assets, the buffer zone rule, and damages to work places have
affected livelihood recovery. In addition to these, inability to participate in
employment training (due to security reasons) has slowed down livelihood
recovery in the Eastern Province.
The damage to tourism infrastructure was quite significant and affected
tourism-related livelihoods. A total of 53 (out of 242) large hotels and a
further 248 small hotels were damaged or destroyed. In terms of hotel
rooms, about 3500 out of a total of 13 000 rooms available in medium to
large-scale hotels were out of service in February 2005. Approximately 210
small enterprises that relied on the tourism industry were also destroyed
along the coastline. They were mostly enterprises engaged in informal
sector activities, and 190 of them were not formally registered with the
tourist board. Of the 53 large-scale hotels damaged, 41 were back in opera-
tion by end-2005.
Despite the gradual restoration of infrastructure damage to tourist
facilities, recovery in livelihoods in the sector was slow. Sri Lanka saw
the largest ever number of tourist arrivals in 2004 and although recorded
‘tourist’ arrival numbers did not fall steeply in 2005, many of those counted
as tourists were aid workers visiting the country rather than genuine tour-
ists. Tourism earnings, in fact, dropped sharply in 2005. This suggests that
many potential tourists were discounting Sri Lanka as a desirable travel
destination in the aftermath of the tsunami. Recovery in tourism was
further constrained by an escalation in ethnic conflict-related incidents
from the end of 2005 that deterred the return of tourists in numbers com-
parable to pre-tsunami levels. Thus, while damage to infrastructure was
relevant, it was the negative psychological impact of the tsunami and the
subsequent political conflicts that seem to have played a more significant
role in hampering recovery in the tourist sector.
By contrast, the recovery of fisheries-related livelihoods was relatively
swift despite the fact that this was the most badly affected sector. Those
engaged in fishing or related activities made up over one-third of the

Table 5.11 Fishing boats destroyed and damaged
Boat type 2004 Damaged Repaired(a) Destroyed Replaced

Fleet (No.) (No.) (No.) (No.)
Multi-day 1 581 676 780 187 0
One-day boats 1 493 783 904 276 29
FRP boats(b) 11 559 3 211 4 258 4 480 4 321
Traditional craft 15 934 2 435 3 479 11 158 8 636
Beach seine craft 1 052 161 134 818 204
Total 31 619 7 266 9 555 16 919 13 190
Note: (a) See note 23 for a discussion of why the number of boats repaired is higher than
the number damaged. (b) FRP 5 fiberglass reinforced plastic.
Source: MFAR (2006).
affected households. In total, over 100 000 people in the fisheries sector
were displaced, 16 434 houses were damaged and 13 329 destroyed, and
nearly 4870 fishers lost their lives with a further 136 reported missing
(MFAR 2006). In terms of equipment (Table 5.11), an estimated 75
per cent of the fishing fleet (32 000 boats) had been totally destroyed or
severely damaged (around 23 per cent were made unseaworthy and 54 per
cent were destroyed), and one million fishing nets were lost. Apart from
these, the basic infrastructure of the fishing industry, such as boatyards,
cold rooms, ice plants, and fish markets, was damaged. Damage to fishery
harbours and other infrastructure facilities, government services facilities,
coast conservation structures, and so on, was placed at US$275 million,
while repair and replacement costs for the damaged fleet were estimated
at US$60 million.
By end-2006, the fisheries harvest had been restored to 70 per cent of
the pre-tsunami level with most of the affected fishers returning to their
occupation (GOSL 2006) and in the conflict-free areas recovery was com-
plete by 2008. The relatively rapid recovery of the fisheries sector can be
attributed primarily to the relatively rapid progress in replacement of the
fishing boats and equipment. The fisheries sector received more immedi-
ate assistance than other affected sectors and was able to replace most
of its productive assets fairly quickly. A large proportion of destroyed
boats had been replaced, and all damaged boats were repaired by end-
2005.23
However, there were complaints about the poor quality of repairs.
According to results of a survey carried out in December 2005, 8 per cent

Sri Lanka 145
of the repaired boats were not being used due to dissatisfaction with the
repairs.24 Inadequate technical inputs and/or supervision, lack of boat-
building knowledge and expertise on the part of NGOs (as well as the
fishers), and the absence of proper contracts for after-sales services were
blamed for poor-quality repairs, with boat-builders using low-quality
material, reducing the thickness, and the like, to meet deadlines and profit
from the opportunity.
By end-2005, 78 per cent of the destroyed fishing fleet had been replaced
(this figure had risen to 95 per cent by mid-2006)25 with pledges for more
than 6000 boats still outstanding. But 19 per cent of the new boats pro-
vided were found to be not seaworthy. Lack of coordination in distribu-
tion efforts also led to conflicts and problems over the increasing numbers
of boats, the quality of boats, and so on. For many NGOs, the provision
of small fishing boats was seen as an ‘attractive’ tsunami aid program that
had high visibility but was easy to implement and not too expensive.
The result of this focus on providing small fishing boats, however, was an
oversupply of boats in some places. Such oversupply had unhealthy longer
term implications for the fisheries sector raising the prospect of over-
fishing. The oversupply was due to several factors. There was no reliable
data on the fishing fleet prior to the tsunami, and the damage assessments
done by a large number of agencies had their weaknesses. Sometimes,
people who were not familiar with the community of fishers were respon-
sible for gathering data on previous boat ownership; this permitted many
non-fishers to acquire boats. Misidentifications and overlaps occurred as
a result of delays in issuing Entitlement Cards by MFAR. Also, the same
beneficiary list was sometimes provided to more than one NGO to speed
up the recovery process. There was a lack of coordination between the
fisheries authorities and the NGOs, poor coordination between NGOs
themselves, and competition amongst these agencies which led to errors
and miscalculations (MFAR 2006). Anecdotal evidence from district-level
authorities indicated that reluctance to share information on the part of
some NGOs made the task of coordinating even more difficult.
Many genuine beneficiaries did not receive new boats because alloca-
tions were not properly targeted. Based on extrapolations from the find-
ings of a survey done by the authorities in December 2005, only 6067 of
the 13 190 (46 per cent) boats distributed went to ‘genuine’ beneficiaries.
Some small, local agencies had provided boats to ‘friends and relatives’
and had bypassed the fishing authorities.26
Access to credit is a vital element for livelihood recovery after a disas-
ter. Most of the tsunami-affected businesses were informal, small-scale
industries – an estimated 25 000 micro-enterprises were damaged in the
disaster. In addition, 15 000 tsunami survivors were previously involved

in self-employed and informal sector activities such as food processing,

coir manufacture, carpentry, and tailoring. While over forty organizations
were involved in a host of microfinance programs established to assist
small- and medium-sized enterprises (SMEs), the primary sources of credit
were two major government finance schemes.
Prior to the tsunami, the Central Bank of Sri Lanka had been imple-
menting a microfinance scheme (Susahana) through the two state-owned
commercial banks. The Susahana loan had been provided with no repay-
ment required for the first year and interest at a fixed rate of 6 per cent
thereafter. The National Development Trust Fund (NDTF) also offered
similar terms through its partner organizations. Following the tsunami,
lending escalated, and by June 2006 25 735 loans and grants of SLRs4769
million (US$47 million) had been provided to micro-, small-, and medium-
sized enterprises (RADA 2006). The majority of these loans were disbursed
in the south and west of the country. The Susahana scheme had reportedly
disbursed US$36 million to 8000 borrowers in the tsunami-affected areas
by September 2005. Of these loans, 75 per cent were in the south and west
of the country. Sixty per cent of the NDTF scheme was also disbursed in
the south, with only 40 per cent going to the north and east of the country
(GOSL 2005a).
Unfortunately, the procedures and processes associated with loan
approval and disbursement seemed weighted against those worst affected
by the tsunami, with the emphasis placed on ensuring high probability of
repayment or loan recovery rather than on meeting the credit needs of
those most in need. Despite claims to the contrary, and its stated intention
to reach the micro-entrepreneurs, the Susahana lending scheme had been
set up in a way that made it very difficult for small tsunami-affected micro-
entrepreneurs to obtain access to the loans. The conditions for access
were quite onerous. Guarantors with a permanent income above a certain
threshold level were required before a loan was approved. Collateral was
required, for which land within the buffer zone was not acceptable. Loans
were only to be given to businesses registered before the tsunami, which
ruled out many smaller, unregistered businesses. These conditions ruled
out, in most cases, people hoping to take up new livelihoods in response
to their changed post-tsunami circumstances, from causes such as, for
example, the death of the main earner, disability, or new responsibilities
for the care of family members.
In fact, it was acknowledged that the many affected businesses in the
buffer zone were especially hard hit because they were unable to access
bank credit, and that banks were reluctant to relax their collateral require-
ments (GOSL 2005a). It was also found that very few new clients were
reached by the subsidized schemes and a considerable number of small

Sri Lanka 147
entrepreneurs were left with no access to credit. The survey results con-
firmed these findings: only a few households (16 per cent of the sample)
even applied for credit. Many households did not apply for loans because
they were not aware that they were eligible to receive them, or because they
felt that their applications would be rejected. Most of those who applied
did receive a loan, but they had to provide collateral and sometimes a
guarantor in order to obtain it. The average size of the loan was fairly
small at less than SLRs100 000 (US$1000).
On a positive note, there is evidence to suggest that microcredit provid-
ers improved cooperation and coordination in an attempt to try to main-
tain the microcredit culture that the post-tsunami supply of microcredit
funds at low interest rates was in danger of undermining.
In the immediate aftermath of the tsunami, a cash grant livelihood
assistance program was announced in January 2005, offering a monthly
cash grant of SLRs5000 (US$50) to each tsunami-affected household
for a period of four months. Over 250 000 households received the first
two instalments on time immediately following the introduction of the
program.27 However, concerns were soon expressed in some quarters
about the need for proper targeting. The Ministry of Finance Directives
then directed local government officials to revise the lists of eligible benefi-
ciaries according to a set of eligibility criteria.
There were complaints from both affected families and even some
government officials that the criteria were not very clear, or were not in
the public domain. This created much confusion and payments halted at
a time of acute need. The government circulars announcing the revised
criteria were quite broad. This meant that local government officers had
considerable room to exercise discretion, resulting in wide variations in
interpretation, allegations of corruption, and delays and long backlogs
of appeals. Interviews with relevant stakeholders, including both affected
families and government officials, suggested that households having access
to ‘regular income’ were no longer eligible. It took several months to draw
up new lists of those eligible to receive the grant, with the number of recipi-
ents eligible for the third payment declining by 25 per cent to 165 000 while
the fourth monthly payment was still ‘on-going’ a year after the tsunami
(GOSL 2005a).
In assessing the value and benefits of changes to this program, it should
be noted that even households with a ‘regular’ post-tsunami income had
suffered a major loss of wealth in terms of property and possessions, and
were cash poor. There was a high probability that they would have to
borrow from high interest, informal sector lenders to meet many pressing
needs. The decision to take recipients with a regular income off the list
after only two monthly payments generated perverse incentives, effectively

penalizing not only those who had held on to previous jobs, but perhaps,
even more importantly, those who had managed to obtain regular employ-
ment after the tsunami. If donor assistance was available for this program
– and it is hard to see why funds were not available if the May 2005 pledges
were honoured – these cutbacks seem hard to justify. Moreover, since
bank accounts had to be opened for the cash grant transfer, the system was
extremely cost effective – many other tsunami livelihood projects had far
higher transactions costs with as much as 30 per cent spent on administra-
tive overheads.
This experience with trying to shift the livelihoods grants program to
a targeting scheme soon after the disaster (only a couple of months after)
holds lessons of much wider applicability for post-disaster situations. By
all accounts, the initial grants scheme was very effective in reaching most
of the affected population. It provided cash at a time of great need, and
even helped to link people with little prior engagement to the formal finan-
cial sector because they had to set up bank deposit accounts to receive
the funds. Unfortunately, the scheme only provided two timely grants
before the emphasis shifted to targeting. In theory, it seems obvious that
grants should be distributed to those who are ‘truly needy’, and therefore
that grants should be properly targeted. But, in practice, the costs of
such narrow targeting must also be taken into account. In the immedi-
ate aftermath of a major disaster, particularly in a poor country, the vast
majority of affected people are ‘truly needy’. Markets are dislocated,
assets have been destroyed, and records are destroyed or missing. In such
circumstances, the cost of trying to exclude a relatively small proportion
of people from the small temporary grants scheme through targeting can
far exceed any benefits.
In Sri Lanka’s case, grants were delayed for all recipients, including
those in dire need; administrative resources were diverted away from
the urgent tasks of recovery and reconstruction, which created room for
petty officials to engage in corruption and aggravated community divi-
sions and tensions. Expectations of benefits from the rush to implement
targeting, only two months after the tsunami, should have been tempered
by the experience with targeting achieved in Sri Lanka’s long-established
national poverty alleviation program (Samurdhi): the leakage in the
Samurdhi program has been estimated to be 40 per cent!
Trauma and Stress
The IPS-TS surveys found some limited evidence of mental and physical
health problems related to the tsunami. About 11 per cent of the house-
holds knew someone who had committed suicide because of the tsunami.

Sri Lanka 149
There were reports of more sleeping difficulties, and children experienc-

ing nightmares that were linked to trauma associated with the tsunami.
A large number of households – 33 per cent of households in the sample
– had been offered or given counselling for distress. The percentage of
people who received counselling was higher in the Eastern Province, pos-
sibly because counselling was already taking place in those areas for suf-
ferers of conflict-related mental health problems.
Twelve per cent of households had family members who had been
injured in the tsunami or whose health had deteriorated afterwards: a large
proportion of such households (77 per cent) claimed that this affected their
income-earning capacity and/or day-to-day activities.
In many cases, the decline in school attendance after the tsunami was
not fully reversed and attendance was reported to be poor even at the end
of 2006, with over 25 per cent of children still not attending school (GOSL
2006). The IPS-TS surveys also found that nearly 30 per cent of house-
holds had children who had not restarted schooling nearly two years after
the tsunami. The schooling problem existed in areas other than just those
affected by conflict, indicating that the problem cannot solely be attributed
to the conflict. Thirty-one per cent of the households reported that the
performance of children who were attending school had fallen.
Assistance
There was a strong international public response to the appeal for recov-
ery assistance. Multilateral and bilateral donors and NGOs pledged
US$3.4 billion for post-tsunami recovery activities at the first Sri Lanka
Development Forum held in May 2005 (MFP 2005; GOSL 2006).28 This
comprised (concessional) loans amounting to US$798 million and the
balance in grants. NGOs pledged a total of US$853 million on a grant
basis. The International Monetary Fund pledged US$268 million by
way of both emergency relief and a debt moratorium. Bilateral donors
extended the debt moratorium providing further relief of US$263 million.
The government reported that around US$2.2 billion (of the total
pledges of US$2.8 billion, which excluded debt relief) could be considered
as firm commitments from the international community (GOSL 2005a).
In addition, an estimated US$150 million was reportedly received as
contributions from domestic sources, without taking into account relief
disbursements (for which figures are not available).
However, actual committed funds made available to the government
appear to have fallen over time to US$2 billion from the previous ‘firmly
committed’ of US$2.2 billion (Table 5.12). At the end of the second year
of reconstruction, total foreign grant expenditure relative to commitments

Table 5.12 Sources of foreign assistance and expenditures (US$ million)
Pledges Commitments Expenditure

International NGOs 378 272 171
International organizations 444 319 76
United Nations 240 109 65
National NGOs 31 22 9
Private sector 16 16 7
Bilaterals 492 912 261
Multilaterals/IFIs(a) 339 396 125
Total foreign grants 1 940 2 046 714
Total foreign loans 1 458 940 377
Government funding(b) 1 462 944 381
Total foreign grants and 3 402 2 990 1 095
government funding
Notes: (a) IFI5international financial institution. (b) Funding by the Sri Lankan
government to finance reconstruction.
was only 35 per cent and foreign loan expenditure was 40 per cent. While
individual agencies varied in performance, the bilateral and multilateral
agencies had spent, on average, 29 per cent and 32 per cent, respectively,
of committed funds by end-2006. In addition, although the initial needs
assessment was placed at US$2.2 billion and a total of US$2.9 billion
was secured as committed funds, the funding gap for the reconstruction
process as at end-2006 was estimated at US$247 million (Table 5.13).
This low rate of expenditure (absorption of available assistance) is not
surprising and highlights the constraints that hinder rapid reconstruction.
Sri Lanka’s past performance in aid absorption has been poor: the rate of
aid utilization in recent years has been only around 20–22 per cent, having
improved from around 13–15 per cent towards the end of the 1990s. Many
reasons have been cited for such low levels of aid utilization, including
political interference with regard to planning, implementation and allo-
cation of funds; staffing and related problems in project management;
implementation delays (including infrastructure bottlenecks, complex and
costly procurement procedures), and excessive conditionality imposed by
donors. Another important factor was the non-availability of adequate
counterpart funds (local funds with appropriation).
Despite the initial euphoria in the aftermath of the tsunami about the
volume and adequacy of foreign assistance, it became clear over time that

Sri Lanka 151
Table 5.13 Sector allocation overview (US$ million)
Funding gap Commitments Expenditure

Housing 107 486 162
Livelihood 20 416 186
Social service 85 393 137
Infrastructure 35 861 134
Other 833 476
Total 247 2 990 1 095
a substantial proportion of reconstruction would have to be domestically

financed. In 2006, the government had committed US$1.5 billion in domes-
tic funds (over one-third of total reconstruction costs as initially estimated)
for tsunami reconstruction. Here it should be noted that this gap emerged
even though the reconstruction program in parts of the East and the North
– areas where damage was severe – were effectively stalled. Thus, at the end
of two years, two problems with the funding of the reconstruction effort
could be identified: the inability of the country to utilize available foreign
assistance in a timely manner, and a widening gap between the actual
amount of foreign assistance received and reconstruction requirements.
While some donor agencies, such as the World Bank, expressed relative
satisfaction with their expenditure levels over the next two years, these
issues remained important, though pushed into the background by politi-
cal developments related to the escalating conflict in 2008.
Delivery and Coordination of Assistance
Coordination of the relief and reconstruction effort emerged as a key

issue from the beginning of the relief effort, and it continued to be a major
issue as the reconstruction and recovery phase started. In Sri Lanka,
coordination was required across three groups: (a) among the various
government agencies, (b) between the numerous donor agencies, and (c)
with the LTTE which was in de facto control of a part of the country that
was heavily affected by the tsunami. Sri Lanka’s governance structure is
such that provincial government agencies have considerable powers, and
this meant that coordination was required not only between the various
central government agencies, but also between the central government
and local government agencies. The involvement of major bilateral and
multilateral donor agencies naturally required that their activities be

coordinated, both among themselves and with the government. Sri Lanka
has long experience working with major donor agencies and several
INGOs maintain long established operations in the country. There had
been some welcome moves towards donor coordination even prior to the
tsunami in the context of conflict-related donor reconstruction programs.
Thus, the World Bank, ADB, and JBIC had already established a part-
nership that enabled a needs assessment to be done immediately after the
tsunami. However, coordination with donor agencies and NGOs became
a vastly more complicated issue due to the numbers and practices of the
numerous international NGOs (not counting large numbers of individu-
als and small groups) who came in after the tsunami. Before long, some
180 NGOs were operating in the tsunami-affected regions of Sri Lanka,
making coordination a difficult and complex task. In addition, establish-
ing effective coordination with the LTTE raised difficult and sensitive
political and constitutional issues.
As mentioned previously, the government initially set up a Centre for
National Operations (CNO) and three task forces to address the coordi-
nation challenge. Subsequently, the Task Force for Rebuilding the Nation
(TAFREN) became the lead agency charged with the task of overseeing
the recovery and reconstruction phase.29 While an overarching authority
such as TAFREN was clearly necessary to coordinate post-disaster recon-
struction, the structure and composition of TAFREN was such that it
was not able to be fully effective in that role. TAFREN was dominated by
private sector representatives, and lacked links to line ministries and clear
lines of authority. This greatly hampered its ability to efficiently coordinate
activities among government agencies. Reconstruction activities had been
divided into sectors, such as housing and water and sanitation. This meant
that coordination across several agencies, often falling under different
ministries, was needed to implement even relatively minor reconstruction
activities. For example, three different agencies had to be brought together
to ensure that new housing units could get access to water, sanitation, and
electricity supplies. Though TAFREN attempted to monitor the line agen-
cies and to play a coordinating role as a ‘one-stop-shop’, its effectiveness
was limited because its role and authority remained unclear.
In November 2005, a decision was taken to amalgamate TAFREN, The
Task Force for Relief (TAFOR) and the Task Force for Logistics and Law
and Order (TAFLOL) into the Reconstruction and Development Agency
(RADA). RADA was given wide powers by an Act of Parliament. It was
given authority over organizations working on post-tsunami reconstruc-
tion and development, and could monitor and control their activities as
well as issue ‘licenses’ that would provide legal authority for them to carry
out specific activities. In theory, this enabled RADA to exercise efficient

Sri Lanka 153
coordination. However, there were potential drawbacks to the vesting of

such wide powers in a single, centralized body. Arguably it could overly
limit the powers of all other agencies and actors, ignore inputs and feed-
back from line ministries and local-level agents, reduce flexibility and
scope for local initiatives and actions, and make the reconstruction effort
too centrally driven. Field observations confirmed that lack of adequate
coordination resulted in considerable mal-distribution of aid. This was
clearly visible, for example, in the way that the distribution of new
boats had been conducted, and – as described in a report by the Auditor
General – in payment of housing assistance.30 Large payments were made
for houses with minor or no damage, NGOs provided houses to families
who were not at all affected by the tsunami, and government grants were
given to people who had already received houses constructed by NGOs.
In practice, RADA’s performance in addressing these issues appears to
have been reasonably satisfactory – though there were occasional reports
of coordination and implementation problems.
The lack of adequate coordination was not only due to weaknesses
on the part of the government-established coordinating bodies. A major
problem was that some NGOs were simply not willing to be ‘coordinated’,
preferring to act alone pursuing their own agendas. INGOs, as well as
some domestic NGOs (particularly those with good foreign links), had
access to relatively large amounts of money. With their own funds secure,
they saw few incentives to improve coordination. In fact, some were
openly hostile to any government action that seemed to place ‘controls’ on
their independence.
Further, the presence of large numbers of donors/NGOs at times led to
competitive behaviour. In several places deep mistrust developed between
local NGOs (who had often been working in the local area for many
years) and some INGOs and other foreign agencies that came to distribute
tsunami assistance. Local NGOs claimed to have been ‘crowded out’ by
some of the better financially endowed larger INGOs, who ‘poached’ staff
and resources. INGOs varied widely in experience, skills, and operating
styles. Many ‘new’ INGOs lacked experience and local knowledge, and
in their haste to spend funds and disburse goods and equipment often
disregarded local circumstances and community needs. Certainly some
INGOs and agencies had valuable expertise in large-scale disaster relief
(such as provision of transitional shelters and other relief measures), but
domestic NGOs (and INGOs that have operated in Sri Lanka for a long
period) usually had a much greater appreciation of local conditions and
sensitivities. Greater interaction, engagement and coordination between
them would have clearly benefited the overall relief and reconstruction
effort. New mechanisms were put in place to improve coordination of

donor activities at regional and local levels through regular meetings and
consultations held by regional administrative officers. However, at the end
of 2006 it was still too early to judge their effectiveness.
The problems caused by some INGOS should not, however, be seen as
typical of all INGOs. In fact, in many cases INGOs played a very positive
role. About 44 per cent of the households surveyed felt that INGOs were
more effective in delivering aid, while only 11 per cent felt that the local
NGOs were more effective.
Coordination with the LTTE proved to be the most difficult and con-
tentious issue. While discussions to establish a mechanism for aid-sharing
began soon after the tsunami, a mutually acceptable arrangement for aid-
sharing to enable assistance to flow into the LTTE-controlled areas proved
elusive. Sections within the government and within the majority com-
munity were opposed to any deal that even appeared to provide de facto
recognition of the LTTE as the administrative power in regions controlled
by it. The LTTE, for its part, was unwilling to accept an arrangement that
diluted its administrative and political power in areas under its control.
After long, drawn-out negotiations, a Memorandum of Understanding
(MoU) setting out an aid-sharing deal between the GOSL and the LTTE,
the Post-Tsunami Operation Management Structure (P-TOMS), was
signed in June 2005. The P-TOMS agreement envisaged the setting up of
a Regional Fund to allow donors to channel tsunami funds directly to the
Northern and Eastern Provinces. A multilateral agency (anticipated to be
the World Bank) was to be appointed as the custodian.
However, this agreement promptly ran into political opposition. It was
challenged in the courts through a fundamental rights petition and the
Supreme Court ruled in July 2005 that certain elements were to be put
on hold pending clarification,31 though the overall mechanism was not
unconstitutional. The situation was aggravated further by the fact that
several major donors who had supported the idea of a joint mechanism
for aid distribution between the GOSL and the LTTE declined to channel
aid directly to the Regional Fund once the MoU was signed, claiming that
the LTTE remains a ‘proscribed terrorist organization’ in their countries.
After the November 2005 election of a new President who publicly opposed
the agreement, P-TOMS became totally inoperative. The conflict between
the GOSL and the LTTE intensified soon after. The renewed violence
disrupted not only the lives of the tsunami-affected people in the area, but
also led to a sharp increase in internally displaced persons, placing further
pressure on aid agencies. There can be little doubt that these problems led
to inequitable distribution of aid, with the most severely affected North
and East missing out on their fair share.
While these political factors affected the distribution of aid across

Sri Lanka 155
regions, there was no strong evidence of widespread corruption in the

distribution of aid within the provinces (though some petty corruption
appears to have affected the distribution of cash grants once targeting was
introduced).32
Cost Escalation
As mentioned, at the time of the May 2005 meeting of the Sri Lanka
Development Forum, the aid promises of the international commu-
nity seemed to more than cover all reconstruction financing needs.
Unfortunately, there was a fundamental flaw in the estimates: they
were based on costs and prices that prevailed immediately after the
tsunami disaster, adjusted for some expected national-level inflation.
These estimates proved to be gross underestimates; clear evidence soon
emerged that construction costs were rising rapidly over time. This was,
of course, not surprising. The scale of construction that was envisaged
was several times larger than that undertaken in a normal period, and
naturally implied sharp increases in demand for construction labour and
materials.33
Total construction costs for the planned houses for tsunami-affected
families had already risen by 30–50 per cent by August 2005, according to
data obtained from companies and organizations involved in house build-
ing and from field interviews (Table 5.14). By September 2006, costs had
exceeded initial estimates by 60–80 per cent or more.
Information from field interviews indicated that these increases are
driven primarily by higher wages for skilled labourers (such as carpenters,
painters, and masons), whose wages have doubled in some locations. This
is confirmed by data from the construction industry body, the Institute for
Construction Training and Development (ICTA) (Figure 5.2).34
Prices of particular building materials, such as cement, sand and bricks,
saw a sharp increase (Figure 5.3). However, it should also be noted that
price increases for importable materials were significantly lower than
overall construction cost increases (Figure 5.4). These data are consistent
with survey information: more than three-quarters of the surveyed key
informants said that wages of carpenters and masons and prices of build-
ing materials increased ‘a lot’ after the tsunami. This has some important
implications: increased local demand can be met without major price
increases when construction materials are importable, but price increases
are unavoidable for domestically sourced (‘non-tradeable’) materials and
labour. The faster the reconstruction program, the higher the price and
cost escalation will be, with less ‘construction’ actually occurring for a
given amount of expenditure.

Table 5.14 Cost escalation in housing construction
Donor Unit Initial August 2005 September 2006

area estimate
Estimate Comments Estimate Comments
(sq ft) (SLRs)
(SLRs) (SLRs)
Red Cross(a) 600 625 000 1 000 000 Houses with all basic 1 250 000– Cost per housing unit with a tiled roof,
(March) infrastructure facilities 1 300 000 basic infrastructure. Price escalation
(electricity, water supply, since last year is about 22% due to
156
sanitation for each house, increase in prices of factors like fuel and
roads, etc.) labour.
CARE 550 450 000 850 000 Jaffna 700 000– This is the average. However, the value
International (March) 600 000 Hambantota 800 000 differs from district to district.
550 000– All other areas (houses with
650 000 little basic infrastructure)
Aitken Spence 550 450 000 . 500 000 With basic infrastructure 550 000(b) A basic housing unit
Co. Ltd (March) (with electricity but no water (Sept. 2005)
supply)
7/10/10 15:38:34
World Vision 500 550 000 700 000 With basic infrastructure 750 000– With basic infrastructure
Lanka(c) (March) 800 000
CARITAS 500 500 000 650 000 A basic house (no mention of 800 000 A basic housing unit only
Sri Lanka (May) infrastructure)
Sarvodaya 500 500 000 650 000 With only a few basic 600 000 South
Movement(d) (May) infrastructure facilities 700 000 North and East
The cost of a basic housing unit only
157
Forut Institute 550 500 000 550 000 Only for the house (not with 700 000– North – with basic infrastructure
(April) basic infrastructure) 900 000
800 000 South – with basic infrastructure
Notes: (a) Estimates said to be costlier because of higher specifications (e.g., use only imported timber); (b) September 2005 estimates; (c) Initial
estimates based on 500 sq. ft. New estimates based on 515–550 sq. ft; (d) Initial estimates based on 500 sq. ft. New estimates based on 540 sq. ft.
Source: IPS surveys.
7/10/10 15:38:34
300
290
280
1990 = 100
270
260
250
240
230
220
DEC
DEC
SEP
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OCT
MAR
APR
MAR
APR
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AUG
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JAN
JAN
MAY
MAY
2004 2005 2006
Skilled labour Semiskilled labour Unskilled labour
Source: Data from the Institute of Construction, Training and Development, June 2006.
Figure 5.2 Price indices for labour wages
1400
1200
1000
1990 = 100
800
600
400
200
0
DEC
JAN
FEB
MAR
APR
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JUL
AUG
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2004 2005 2006
Cement Sand Bricks
Figure 5.3 Prices of raw materials for building

Sri Lanka 159
430
380
1990 = 100
330
280
230
180
DEC
JAN
FEB
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2004 2005 2006
Cement (local exfactory prices) Cement (imported)

Sanitary ware (local) Sanitary ware (imported)
Figure 5.4 Imported and local prices of building materials
Broader Economic Impacts
The typical pattern for economies struck by unanticipated natural disas-

ters has been to experience a brief deceleration in growth, followed by a
rebound as a result of the stimulus from reconstruction programs. GDP
growth dipped in the first quarter of 2005 but subsequently showed a
strong resurgence. Predictably, the fisheries and hotels and restaurants
sub-sectors experienced a sharp contraction in output while the construc-
tion sub-sector experienced strong growth (Table 5.15). The recovery was
better than initially anticipated, and was broad-based. There was contin-
ued expansion in industry and services, as well as a recovery in agriculture
following improved weather conditions, and this good growth perform-
ance continued into 2006.
The tsunami reconstruction undoubtedly brightened prospects for Sri
Lanka’s short-term economic outlook. The total investment/GDP ratio
increased by 1.5 percentage points in 2005, much of it driven by govern-
ment investment. In fact, the investment/GDP ratio improved to 28.7 per
cent in 2006. This was reflected in higher imports of investment goods and
construction activities.
While the additional tsunami-related expenditure was budgeted to be
met by foreign grants, financing needs increased owing to cost escalation
and the increase in the numbers of housing units required. Despite added

Table 5.15 GDP growth rates (in per cent)
2004 2005 2006

Agriculture 20.3 1.9 4.7
Fishing 1.6 242.2 51.7
Industry 5.2 8.3 7.2
Construction 6.6 8.9 8.0
Services 7.6 6.2 8.3
Hotels & restaurants 13.1 227.5 6.3
GDP 5.4 6.0 7.4
Source: Central Bank of Sri Lanka, Annual Report 2006.
Table 5.16 Post-tsunami fiscal outlook
(As % of GDP) 2004 2005 2006

Revenue 15 16 17
Expenditure 23 25 25
Current 19 19 19
Capital 4 6 6
Fiscal deficit 28 29 28
Financing
Foreign loans 2 2 2
Foreign grants ... 1 1
Domestic 6 5 6
Source: Central Bank of Sri Lanka, Annual Report 2006.
fiscal pressures, there was little effort to curtail spending in other areas,
fuelling inflationary pressures from policies unrelated to tsunami recon-
struction (Table 5.16).35 Fiscal profligacy in the face of higher spending
on tsunami-related rehabilitation aggravated inflationary pressures in the
economy. The initial response to rising inflationary pressure was slow, and
interest rates remained unchanged allowing credit growth to expand at a
rate of over 20 per cent. Broad money growth in 2006 was 17.8 per cent,
and inflation rose from 11.6 per cent in 2005 to 13.7 per cent in 2006.
The Sri Lankan electorate has traditionally been very sensitive to infla-
tion. Elections were scheduled for late 2005 and the government was keen
to keep inflation in check. This generated political pressures to resist any
exchange rate depreciation which could have intensified domestic infla-
tion. There is some evidence to suggest that the tsunami-related capital
inflows were used to prop up the nominal exchange rate in 2005, and this

Sri Lanka 161
115
110
105
Jan.–Dec. 1999 = 100
100
95
90
85
80
75
70
65
60
55
JAN
FEB
MAR
APR
MAY
JUN
JUL
AUG
SEP
OCT
NOV
DEC
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FEB
MAR
APR
MAY
JUN
JUL
AUG
SEP
OCT
NOV
DEC
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FEB
MAR
APR
MAY
JUN
JUL
2004 2005 2006
NEER REER
Notes: The nominal effective exchange rate (NEER) and real effective exchange rate
(REER) are based on trade composition with 24 trading partners.
Source: Central Bank of Sri Lanka (www.centralbanklanka.org).
Figure 5.5 Nominal and real effective exchange rate
may have been a factor in the slow absorption of aid flows. There was
also a significant increase in inward remittances from 6.7 per cent of GDP
in 2004 to 7.7 per cent by 2006. While some of the increase may reflect
assistance provided to affected family and friends, the increase could also
reflect better earnings performance of the majority of migrants employed
in the oil rich Middle Eastern countries. Sri Lanka managed to record an
overall surplus of US$500 million on the BOP in 2005 (compared with a
deficit of US$205 million in 2004) and official reserves showed a sharp
improvement.
The influx of increased foreign capital reversed the sharp depreciation of
the rupee vis-à-vis the US dollar at end-2004, leading to a nominal appre-
ciation of over 5.5 per cent in the week following the disaster (Figure 5.5).36
The nominal effective exchange rate (NEER) appreciated by 7.7 per cent
in 2005 (compared to a depreciation of 11 per cent in 2004). The higher
nominal appreciation in the context of relatively high domestic inflation
led to a real effective exchange rate (REER) appreciation of 12.7 per cent
(as against a depreciation of 1.1 per cent in 2004). To the extent that this
real appreciation was a result of tsunami-related aid flows, it would have
had the standard Dutch Disease effects on Sri Lanka’s exports.

Aid flows following a disaster are, by their nature, temporary. As the

tsunami-related capital inflows eased over time, the government was com-
pelled to seek other forms of external funds to finance the expanding fiscal
deficit. In December 2005 Sri Lanka sought a sovereign credit rating as the
first step to raising an estimated US$0.5–1 billion in the international bond
market. Sri Lanka was assigned a BB2 (below investment grade) and a
B1 by two rating agencies. But, with the escalation in domestic hostili-
ties the credit outlook was downgraded from stable to negative in April
2006. In 2006, for example, the government raised US$580 million by
issuing 2–3-year maturity dollar bonds (Sri Lanka Development Bonds)
at rates of 120–140 basis points above the London Inter-Bank Offer Rate
(LIBOR) despite the inherent risks involved in recourse to foreign com-
mercial borrowings.
Thus, the overall macroeconomic trends raised serious concerns about
the sustainability of the country’s post-tsunami burst of GDP growth once
the temporary aid flows ceased. However, other developments – such as the
massive increase in military expenditure and other forms of government
expenditure – soon dwarfed the negative impact of reduced tsunami aid
flows on economic activity.
Social Cohesion
The spontaneous solidarity that united communities immediately after

the tsunami rekindled hopes that the ethnic divisions that had cost the
country so dearly in recent years might finally be on the wane. But the
post-tsunami relief and reconstruction activities contributed to increased
social tensions among various groups in affected communities. Many poor
households who were unaffected by the tsunami were unhappy because
they were ineligible for tsunami aid. This was particularly important in the
conflict-affected Eastern Province where large numbers of people have suf-
fered from the two-decade-long conflict and have been internally displaced
for long periods of time. The subsequent escalation in hostilities between
the GOSL and the LTTE plunged the country back into large-scale con-
flict, which finally ended in a military victory for the government but may
not have produced greater ethnic harmony. This was in sharp contrast to
what happened in Aceh, Indonesia, where the tsunami created conditions
for the cessation of a long-running secessionist war and a sharp lowering
of community tensions.
There were several reasons why the relief and reconstruction activities
aggravated social tensions in Sri Lanka. In some instances the manner in
which tsunami-damaged physical assets were replaced exacerbated pre-
existing tensions and rivalries. In other places, tensions developed between

Sri Lanka 163
fishers and other groups because the latter felt that the fishing industry
received greater attention. Similar tensions emerged in the housing sector.
The substantial quality differences between different types of houses built
by different organizations, and the different levels of grants given to differ-
ent groups created perceptions of inequity.37
OVERALL ASSESSMENT AND CONCLUSIONS
For Sri Lanka, facing a totally unanticipated major natural disaster

and coping with the subsequent reconstruction and recovery needs was
a unique experience. In the circumstances, the initial relief effort can be
assessed as quite satisfactory. An unusually large amount of aid, from
a very large number of organizations, arrived in a very short time. Also, a
large proportion of aid flowed through individual, private, and non-
government organization hands instead of through the traditional donor
agencies or the United Nations. This facilitated rapid relief and early ini-
tiation of reconstruction activities, but also raised issues of coordination
and aid absorption, and posed some unique challenges. The problems and
issues that emerged included:
● Problems related to the absorptive capacity of government and

households;
● Very high transaction costs and major coordination problems
caused by a large number of donor organizations;
● Rapid increases in demand for labour and raw materials leading to
construction cost escalation;
● Excessive focus on the quantity of aid disbursement that under-
mined the effectiveness of aid (for example, mal-distribution, poor
quality fishing boats, and the like);
● Lack of adequate local capacity to provide the information neces-
sary for effective coordination and monitoring of aid distribution;
● Lack of clear and transparent information-sharing mechanisms
between various governmental and non-governmental agents; and
● Differences in levels of assistance provided to tsunami-affected
households and conflict-affected households in the North and the
East.
It must also be pointed out that many initial fears about a range of
likely problems either proved to be not well founded or were resolved
effectively. In particular, large-scale corruption did not become a major
problem, perhaps because the reconstruction did not involve large-scale

infrastructure projects. Cases of petty corruption were recorded, such as

officials abusing discretionary powers (for example, determining eligibility
for different types of housing aid and cash grants). In several such cases
the government took disciplinary action. There were also fears that large-
scale imports of food as aid would depress domestic producer prices and
hurt farmers. But the government ensured that new food purchases by
the World Food Programme were domestically sourced to help farmers
recover and maintain rural incomes.
The Sri Lankan experience suggests strongly that the mode of assist-
ance must take into account the stage of the relief effort. In the initial
relief stage, what is most important is to ensure delivery of basic food,
clothing, medicines, and shelter. At this stage, the provision of aid in kind
is probably essential. But even just a short period later, aid in kind may
not be the most effective mode of assistance. Except in very remote loca-
tions, markets and links with the rest of the economy get re-established
very quickly and allow supplies to be brought in from surrounding areas
and from existing stocks. Cash grants enable people to access markets and
obtain needed supplies more efficiently and effectively. In fact, substantial
amounts of aid in kind were often wasted because they did not meet the
requirements or the preferences of the affected households. In contrast,
cash grants allowed households the flexibility to spend on goods and serv-
ices they actually desired.
Another issue often raised in disaster relief is whether assistance should
be narrowly targeted to the ‘most needy’ groups only, or provided to all
affected people. In Sri Lanka, experience suggests that the costs of narrow
targeting may outweigh benefits in the early phase of relief. The benefici-
ary lists drawn up by government agencies not only delayed distribution of
grants, but also became, at times, an inefficient, corruption-prone process.
In principle, systems can be created where the most needy ‘self select’, and
these can work fairly effectively in some circumstances. But it is not clear
that the savings made justify the costs in delays, the incentives for corrup-
tion, and the likelihood that some truly needy groups miss out altogether.
A major challenge in Sri Lanka was to devise appropriate administrative
mechanisms to ensure effective coordination between central government
and local agencies, and to ensure that central coordination did not end up
stifling local initiatives. Decision-making in disaster situations requires a
complex balance of roles between the central government and the locally
affected areas, and the central government must be responsive to the
concerns and feedback from local agents. Sri Lanka initially tended to
have an overly centralized system. There were concerns that local govern-
ments were not given enough freedom to make decisions and implement
them. Also, the central government seemed to have rushed to establish

Sri Lanka 165
new institutions specifically to deal with tsunami-related aid distribution,

ignoring or bypassing existing institutions, resulting in the reduced effec-
tiveness of reconstruction efforts.
The aftermath of the tsunami disaster also raised issues of macroeco-
nomic management of relevance for countries affected by a major disaster.
Sri Lanka was faced with the challenge of absorbing a large but necessarily
temporary inflow of foreign funds. In itself this is a complex task. But the
task was made even more difficult by the need to direct those funds effi-
ciently to emergency relief, and then to rehabilitation and reconstruction
of damaged assets and infrastructure.
Sri Lanka’s experience highlights the need for factoring in major con-
struction cost increases when assessing needs following major disasters,
and the need for the formulation of reconstruction programs which take
into account supply side constraints. The initial assumption that foreign
financing was adequate for reconstruction was quickly dispelled. The large
reconstruction program quickly raised demand for construction inputs
that produced sharp increases in construction costs. In turn, this produced
funding gaps that had to be filled either by the government – widening the
already larger fiscal deficit – or by additional foreign assistance. Arguably,
the institutional weaknesses and political factors that slowed absorption of
foreign assistance may have helped to restrain such cost increases, thereby
allowing a larger share of tsunami expenditures to be effective in asset
rehabilitation rather than be captured by construction input owners.
The Sri Lankan reconstruction program took place in a context of
sharpening political conflict. This posed problems with aid distribution
that aggravated perceptions of regional/ethnic bias in policy and regional
disparities. When it comes to an assessment of the overall success of the
reconstruction effort in Sri Lanka, these problems resulted in what the
World Bank (2008: 16) rather coyly described as ‘lingering concerns about
the overall tsunami reconstruction effort’. It is to be hoped that with the
end of the violent conflict there can be a revival of attention to the recon-
struction needs of these areas so that affected groups will be finally able to
leave the trauma and suffering inflicted by the tsunami behind them.
NOTES
1. Dushni Weerakoon, Sisira Jayasuriya, Nisha Arunatilake and Paul Steele were prima-
rily responsible for this chapter, which draws on Weerakoon et al. (2007).
2. Sri Lanka had no effective domestic hazard warning system, and had not felt the need
to be part of international early warning systems, such as the Tsunami Warning System
(TWS) in the Pacific (which has 26 member countries).
3. The significant differences between total recovery needs and damages in some sectors

were due to the fact that the recovery strategy for those sectors focused on long-term
development targets rather than merely on restoration.
4. The GOSL identified its needs for a three- to five-year rehabilitation phase.
5. For example, while food rations were generally available, there were problems with the
provision of adequate variety and quality in some locations; complaints emerged about
the application of different rules in different areas for the distribution of rations and
cash grants.
6. An assessment of the initial response to the tsunami at the Sri Lanka Development
Forum 2005 can be found at www.erd.gov.lk/DevForum/
7. As of end-2006, 42 096 of the 57 057 shelters originally constructed had been decommis-
sioned with only 14 961 shelters remaining occupied (GOSL 2006).
8. For details on methodology and coverage of the surveys, see Weerakoon et al.
(2007).
9. A village level administrative unit.
10. About 53 per cent of the surveyed houses made unusable by the tsunami were less than
450 square feet, while only 10 per cent were bigger than 600 square feet.
11. About 32 per cent of roofs of the surveyed houses were made of cadjan or metal sheets,
while close to half of the surveyed houses had walls made of temporary material.
12. About 13 per cent of surveyed households inside the buffer zone owned houses on gov-
ernment land, while a further 9 per cent owned houses built on other people’s private
land.
13. The new boundaries were set according to the Coast Conservation Department (CCD)
Coastal Management Plan of 1997.
14. Zone 1 referred to any state reservation within tsunami-affected areas while Zone 2 is
any area outside Zone 1.
15. Extended since then to co-financing arrangements through local and foreign NGOs as
well.
16. Sunday Times, 14 May 2006. About 3 per cent of the households surveyed in the
IPS-TS 2006 had shifted from one NGO-allocated list to another. The most common
reasons for switching were: expectation of better assistance, to move closer to the sea,
or because the first NGO had failed to deliver a house.
17. Daily Mirror, 28 January 2006.
18. Sunday Observer, 27 August 2006.
19. RADA estimates those who lost livelihoods at 200 000 with a further 125 000 jobs being
lost indirectly (see www.rada.gov.lk).
20. About a half of the household heads that had changed their livelihoods came from one
GND, in the Eastern Province.
21. Further, the current housing situation does not appear to have any effect on livelihood
recovery.
22. Key informants in almost all surveyed districts in the Southern Province, and in around
half of the surveyed districts in the Eastern Province, thought people were better off
because of aid, training, and more employment opportunities. There were also consid-
erable differences between clusters of villages.
23. There is some debate about the exact numbers of boats damaged and repaired. For
most boat types, the number of crafts repaired exceeded the numbers reported as
damaged. It has been suggested that boat owners in non-tsunami-affected areas may
have transferred their boats to these areas to take advantage of the opportunity to get
minor repairs done, that there may have been miscategorization of beach seine crafts as
traditional crafts, and that boats classified as destroyed may have been repaired and put
back to sea.
24. Cited in MFAR (2006).
25. RADA (2006).
26. The efficiency implications of the misallocation of these fishery assets may be corrected
over time because those who were mistakenly given boats or the like may have been
able to subsequently sell them to genuine fishers who could make use of them. But this

Sri Lanka 167
would not be much consolation for people who had lost assets and lacked the necessary
finances to buy them, even at discount prices.
27. This had some other cash grant components too, including a grant for a family death.
According to the IPS-TS 2005 data (collected in April/May 2005), all surveyed districts
had received funds of SLRs15 000 for deaths, SLRs2500 for kitchen equipment, and a
SLRs5000 livelihood grant and food/cash coupon.
28. The US$3.4 billion included debt relief/moratorium and IMF support.
29. After one month, with the conclusion of immediate relief operations TAFRER and
TAFLOL were amalgamated to a single entity – the Task Force for Relief (TAFOR)
– to implement all relief measures, and the operations of the CNO were scaled down.
In February, the CNO was dissolved and officials returned to line ministries. TAFOR
and TAFREN took over the responsibilities of the CNO. With the completion of tran-
sitional housing, TAFOR was expected to wind down operations and pass its responsi-
bilities to the line ministries.
30. This report on the tsunami rehabilitation covers the period 26 December 2004 to 30
June 2005. See GOSL (2005b).
31. Specifically, these elements were the Regional Fund and the location of the regional
committee in the rebel-held Kilinochchi city.
32. According to the household survey respondents, very few households had paid bribes to
government or NGO officials to receive aid, and very few were aware of instances where
politicians had interfered directly.
33. There were varying estimates of the extra demand for house construction, but they all
pointed to a massive increase in demand for scarce construction labour and materials.
According to the Chamber of Construction Industry, as reported in the Daily Mirror,
21 February 2005, it was estimated that at least 100 000 additional workers would be
required, including about 13 000 masons, 2000 carpenters, 2500 painters, and nearly
54 000 unskilled labourers.
34. Organizations involved in tsunami housing construction were required to use ICTA
registered contractors.
35. For example, adding workers to the government pay-roll saw payments on salaries and
wages rising from 5.2 per cent of GDP in 2004 to 5.9 per cent of GDP in 2005; transfers
and subsidies over time increased from 4 per cent of GDP in 2003 to 5.4 per cent of
GDP in 2005.
36. The currency depreciated to SLRs105.47 per US dollar on 17 December 2004 – the
highest rate in the interbank market. It had appreciated to SLRs98.11 by 12 January
2005. The appreciation of the rupee for the rest of the year was also partly influenced by
the movement of major currencies as the US dollar appreciated against them.
37. The government was forced to lay down specific standards for new houses because of
large differences in size, quality, and so on, among donor-built houses.
REFERENCES
Asian Development Bank (ADB), Japan Bank for International Cooperation

(JBIC) and World Bank (WB) (2005), Sri Lanka 2005 Post-Tsunami Recovery
Program: Preliminary Damage and Needs Assessment, Colombo, Sri Lanka,
10–28 January 2005.
GOSL (Government of Sri Lanka) (2005a), Sri Lanka: Post Tsunami Recovery and
Reconstruction, Joint Report of the Government of Sri Lanka and Development
Partners, December 2005.
GOSL (2005b), Interim Report of the Auditor General on the Rehabilitation of the
Losses and Damages Caused to Sri Lanka by the Tsunami, September 2005.
GOSL (2005c), Post Tsunami Recovery and Reconstruction Strategy, May 2005.

GOSL (2005d), Rebuilding Sri Lanka: Action Plan, February 2005.

GOSL (2006), Post Tsunami Recovery and Reconstruction, Joint Report of the
Government of Sri Lanka and Development Partners, December 2006.
IPS (Institute of Policy Studies) (2005), ‘Survey and analysis of rebuilding and
relocation of tsunami affected households in Sri Lanka’, mimeo, June 2005.
Issues and Challenges in Sri Lanka, Research Paper no. 71, ADB Institute,
Japan.
MFAR (Ministry of Fisheries and Aquatic Resources) (2006), Recovery Assessment
in the Fisheries Sector, Draft Report, June 2006.
MFP (Ministry of Finance and Planning) (2005), Annual Report 2005, December
2005.
MFP (2006), Mid Year Fiscal Position Report, June 2006.
RADA (Reconstruction and Development Agency) (2006), Post Tsunami Recovery
and Reconstruction: Mid Year Review, June 2006.
Weerakoon, Dushni, S. Jayasuriya, N. Arunatilake and P. Steele (2007),
Economic Challenges of Post-Tsunami Reconstruction in Sri Lanka, Tokyo:
Asian Development Bank Institute, http://www.adbi.org/discussion-paper/
2007/08/31/2354.sri.lanka.post.tsunami.reconstruction/, accessed 31 October
2009.
World Bank (2008), Country Assistance Strategy for the Democratic Socialist
Republic of Sri Lanka for the Period FY 2009–2012, Report no: 43471-LK,
Washington, DC: World Bank.

Sri Lanka 169
APPENDIX 5A.1 SUMMARY OF METHODOLOGY

FOR IPS TSUNAMI SURVEY 2005
AND 2006
Eight districts that were most severely affected by the tsunami in the
Northern, Eastern, and Southern provinces were selected for the survey.
These consisted of the Trincomalee, Batticaloa and Ampara districts
from the Eastern Province, the Jaffna and Mullaitivu districts from the
Northern Province, and the Hambantota, Matara and Galle districts from
the Southern Province.
In these eight districts, Grama Niladhari Divisions (GNDs) were first
identified using Department of Census and Statistics (DCS) data as those
where more than 50 per cent of houses were made unusable due to being
completely or severely damaged.
The 16 GNDs for the study were distributed across the eight districts
based on the level of housing damage in each district (Table 5A.1). Within
the districts, GNDs were chosen based on socio-economic data so as to
select a representative set of GNDs considering ethnicity, religion, liveli-
hoods, and the location with respect to the 2005 buffer zone (the ‘no-build’
zone). Socio-economic data for this purpose were obtained from the 2001
Census by the DCS for the Southern districts. Since census data did not
extend to the districts in the Eastern and the Northern provinces, socio-
economic information for these provinces was obtained through key
informants from those areas. Key informant information was also used
to select GNDs with households both within and outside the 2005 buffer
zone. (Information given by key informants in this regard was not entirely
Table 5A.1 Distribution of GNDs(a) across selected districts
District Number of unusable No of GNDs selected for

houses survey
Jaffna 3 686 1
Mullaitivu 5 137 1
Trincomalee 4 643 2
Batticaloa 9 905 4
Ampara 10 566 4
Hambantota 1 290 1
Matara 2 401 1
Galle 6 169 2
Note: Information from Mullaitivu was not available for the selection process. (a) Grama
Niladhari Divisions.

accurate, and, as a result, some GNDs that were mostly within the no-
build zone remained in the sample.)
A sample of 45 households from the list of unusable houses for each
GND was randomly selected for the household survey, with 30 households
outside the no-build zone and 15 within. However, in some GNDs there
were less than 30 houses outside the buffer zone. In these instances, more
households from within the buffer zone were interviewed to make up the
sample. The households were selected using DCS tsunami census data
where available. For the two GNDs where DCS data were not available,
household lists obtained from Grama Niladharis (GNs) were used as a
frame.
Due to delays in obtaining access, the survey could not cover the Jaffna
and Mullaitivu districts of the Northern Province. Therefore, information
is only available for 14 GNDs in the Southern and Eastern provinces.
Information from the selected GNDs was collected at several levels in
April 2005. To obtain community-level perspectives on rebuilding, reloca-
tion, and land issues, focus groups were conducted in all GNDs. In addi-
tion, community-level information to ascertain community characteristics
and information on rebuilding, relocation, and land issues was obtained
through key informant interviews based on a structured questionnaire. In
addition to these interviews, information on land supply in the GNDs was
obtained from the relevant Divisional Secretary’s Office, also based on a
structured questionnaire. The household-level interviews were conducted
using a structured household questionnaire. The questionnaires were
drafted in English and translated to Sinhala and Tamil for use in different
GNDs.
In July 2006, an attempt was made to resurvey all the 622 households
that were interviewed for the April 2005 survey with the view of gaining
updated information on the progress of the reconstruction effort. The
survey was designed to address issues of permanent housing paucity,
recovery in livelihoods, and so on, to get a clearer picture of where Sri
Lanka stood in the reconstruction process one and a half years after the
tsunami disaster. In addition to the housing survey, three key informant
interviews in each GND were conducted. When a household could not be
located, randomly selected replacement houses were surveyed from the
GND. The resulting database consisted of 595 households, of which 564
were from the original 622 households.

6. Thailand1
INTRODUCTION
The tsunami that hit six southern provinces of Thailand on 26 December
2004 is the worst natural disaster Thailand has ever experienced in terms
of human tragedy, bringing incalculable misery to affected communities
and massive damages to their livelihoods. It killed over 8000 people and
injured thousands more; it damaged or destroyed thousands of houses,
other buildings, roads, bridges, and other physical infrastructure. Because
the tsunami hit some of Thailand’s most popular beach tourist resorts, a
large number of foreign tourists were among the dead and injured.
Total damages were assessed at around US$508 million, while losses
were estimated at US$1.69 billion, totalling US$2.2 billion (1.4 per cent
of GDP).2 The impact on the affected provinces was quite severe: it was
assessed to be equivalent to one half of the combined gross provincial
product (GPP). In some cases, such as that of Phuket, damage and losses
equalled 90 per cent of GPP, and in Krabi and Phang Nga, they were
around 70 per cent.3
Though the impact of the tsunami was quite severe, after accepting
technical assistance at the early stages, Thailand relied mostly on its
own resources in coping with the reconstruction tasks, unlike Indonesia
and Sri Lanka. Thailand’s experience with the wider economic effects of
large-scale reconstruction activities also seems to have differed from that
of other affected countries in some respects. Overall Thailand appears to
have been more successful than Indonesia and Sri Lanka in overcoming
the economic effects of the tsunami. This provides an interesting contrast
to the experience of Indonesia and Sri Lanka, which relied heavily on
international assistance in their reconstruction efforts.
This chapter provides a descriptive and analytical narrative of the post-
tsunami relief efforts and reconstruction activities in Thailand in the first
two years after the disaster to the end of 2006. This approach facilitates
comparative analysis of the experiences of the three countries. The chapter
is organized as follows: the first section after this introduction describes
briefly the damage and costs of the tsunami, and is followed by an exami-
nation of the immediate response after the disaster. The third section
171

discusses short-term economic effects of the tsunami, and the fourth dis-
cusses the experience of rehabilitation, reconstruction and recovery. In the
fifth section the issues related to adequacy, efficiency, and effectiveness of
aid and assistance are considered. The above discussions are based largely
on secondary data. As part of this study, fieldwork was carried out in the
tsunami-affected areas and primary data was collected from a sample
survey of displaced and non-displaced individuals, visitors, and seven
NGOs in the three most severely affected provinces. This information is
presented in the sixth section. In the final section the main findings of the
study and some policy implications are summarized.
DAMAGE AND COSTS
In the cases of Indonesia and Sri Lanka, the largest economic losses from
the tsunami were caused by damage to physical infrastructure and prop-
erty. In contrast, Thailand’s biggest source of losses occurred in the pro-
ductive sectors, particularly tourism, because the most severely affected
areas were key tourism destinations. As a result, initial estimates of ana-
lysts led to forecasts of significant reductions in the GDP growth rate. JP
Morgan, for example, revised the first quarter growth rate of 2005 to zero
from the previous projection of 3 per cent. The 2005 annual GDP growth
rate was also revised downward by 0.3 per cent to 5.7 per cent. Similarly,
Morgan Stanley reduced its annual growth projection from 6 per cent to
5.7 per cent, citing, in particular, the dampening multiplier effects on the
economy of the damage caused by the tsunami on the tourism industry.
Of the six Thai provinces hit by the tsunami (Table 6.1), Phang Nga,
Phuket, and Krabi were the most severely affected. Phang Nga – in
particular the Kao Lak and Ban Nam Kem areas – suffered the most in
terms of human and economic losses (79 per cent of the total 5395 casual-
ties) (Table 6.1). Krabi sustained the second heaviest loss of life (13 per
cent) but damage to infrastructure and the business sector were higher
in Phuket, which suffered the most serious damage to infrastructure of
around US$100 million. Ranong, Trang, and Satul, which are not tourist
destinations like the other three provinces, suffered mainly from damages
to aqua culture and destruction of fishing boats and equipment.
The initial relief efforts in Thailand were complicated by the need to deal
with a large number of dead, injured, and missing foreigners. In most loca-
tions, casualties amongst Thai nationals were higher than those among
foreigners. However in Phang Nga, a major centre of tourism and with
the tourist season at its peak, foreign casualties exceeded Thai casualties
(Figure 6.1). In addition, foreign casualties in Phang Nga also included

Table 6.1 Numbers of dead, injured, and missing due to the December 2004 tsunami
Province Dead Injured Missing

Thai Foreigners Unidentified Total Thai Foreigners Total Thai Foreigners Total
Phuket 151 111 17 279 591 520 1 111 245 363 608
Phang Nga 1 389 2 114 722 4 225 4 344 1 253 5 597 1 352 303 1 655
173
Krabi 357 203 161 721 808 568 1 376 314 230 544
Ranong 153 6 – 159 215 31 246 9 – 9
Trang 3 2 – 5 92 20 112 1 – 1
Satul 6 – – 6 15 – 15 – – –
Total 2 059 2 436 900 5 395 6 065 2 392 8 457 1 921 896 2 817
Source: Department of Disaster Prevention and Mitigation (DDPM), Ministry of the Interior.
7/10/10 15:38:35
2500
2000
1500
1000
500
0
Phuket Phang Nga Krabi Ranong Trang Satul
Thai Foreigner
Source: Department of Disaster Prevention and Mitigation (DDPM).
Figure 6.1 Thai and foreign death toll
a large number of migrant workers from Myanmar. The 2817 missing

persons, most likely dead, suggests that large numbers were dragged into
the sea by the giant waves.
The impact of the tsunami was spread over a large number of villages
in these provinces. This made the provision of immediate relief difficult.
Krabi had the highest number of affected villages but not the largest
number of casualties (Table 6.2).
In total, the tsunami directly affected 12 815 households comprising
more than 58 550 people. A total of 3302 houses were destroyed and 1504
were damaged (Table 6.2). Phang Nga accounted for 52 per cent of total
house destruction, followed by Phuket with 21 per cent, and Krabi with
14 per cent.
Damages to business properties accounted for most of the damage in
Phang Nga, Phuket, and Krabi while damages to the fisheries sector were
the most important in the other three provinces (Table 6.3). These differ-
ences in the nature of damages between the two groups of provinces meant
that they required quite different rehabilitation and reconstruction activi-
ties: Phang Nga, Phuket, and Krabi needed urgent measures to restore
tourism and business properties, while Trang, Ranong, and Satul required
assistance to restore the fisheries industry.
Most of the losses inflicted on people’s livelihoods (88 per cent) came

Thailand 175
Table 6.2 Impact on housing
Province Number of people Residences affected Affected

affected (number of houses) villages
(number)
persons households destroyed damaged total
Phang Nga 19 509 4 394 1 904 604 2 508 69
Krabi 15 812 2 759 396 262 658 112
Phuket 13 065 2 616 742 291 1 033 58
Ranong 5 942 1 509 224 111 335 47
Trang 1 302 1 123 34 156 190 51
Satul 2 920 414 2 80 82 70
Total 58 550 12 815 3 302 1 504 4 806 407
Source: DDPM.
Table 6.3 Damage to livelihoods (US$ mn)
Fishery Livestock Agriculture Business Total

property damage
Phang Nga 22.8 0.3 ... 161.4 184.6
Krabi 4.8 ... ... 67.1 71.9
Phuket 8.6 ... ... 87.8 96.4
Ranong 4.3 ... ... ... 4.4
Trang 1.7 ... ... 0.2 1.9
Satul 3.0 ... ... – 3.0
Total 45.2 0.4 0.2 316.4 362.2
Per cent 12 ... ... 87 100
Source: DDPM.
from the damage to business properties in Phang Nga, Phuket, and Krabi.
Most of these properties were hotels, critical to the tourism industry.
Fisheries was the second most affected sector (12 per cent) while damage
to livestock and agriculture was negligible. In Phang Nga, though most of
the damage was to business properties, the fisheries sector was also signifi-
cantly affected (Table 6.4). Many fishing boats were lost or damaged, and
there were extensive damages to fish cages and shrimp hatcheries (which in
turn affected the wider southern shrimp industry, which relied on supplies
of post-larvae from these hatcheries).
The total damage to roads and bridges was relatively minor (estimated

Table 6.4 Tsunami damage to fisheries
Province Fish cage culture Shrimp hatchery Damage

Area affected Area affected (US$ mn)
(’000 m2) (’000 m2)
Phang Nga 141 16 22.9
Krabi 66 0 4.8
Phuket 53 76 8.6
Ranong 856 0 4.3
Trang 24 0 0.4
Satul 85 0 3.0
Total 1 224 92 43.9
Source: DDPM and Department of Fisheries.
at less than US$2 million). This also meant that emergency relief and
assistance could be delivered relatively quickly immediately after the
tsunami. The more costly damage to infrastructure came from the numer-
ous damaged piers, which delayed fishermen from returning to their
normal livelihoods (Table 6.5). Twelve schools were either destroyed or
severely damaged, while another twelve suffered mild damage.
IMMEDIATE RESPONSE: DESCRIPTION AND

ASSESSMENT
The emergency response following the disaster naturally focused on the

provision of basic shelter, food, and medical assistance, and search and
rescue missions for survivors. It was the neighbouring communities who
first rushed to the assistance of the tsunami victims.4 These community
actions were followed by government initiatives and international assist-
ance. The Tsunami Victim Relief Center was established on 26 December
2004 to coordinate mobilizing relief efforts from all sectors of society.
The Center provided an international and domestic call centre to provide
information to relatives of both Thai and foreign disaster victims. It
also acted as a 24-hour donation centre for both cash and essential sup-
plies, which were transported by container trucks to the six provinces.
Other donation centres were also established by government and non-
government agencies.
The relief efforts focused on areas along Patong and Kamala beaches
in Phuket, Khao Lak, Phi Phi Island, and Ban Nam Kem – the areas

Table 6.5 Infrastructure and public utility damage
Piers Concrete bridges Wooden bridges Box culvert and dykes Roads
Units US$ ’000 Units US$ ’000 Units US$ ’000 Units US$ ’000 Units US$ ’000
Phang Nga 5 206 11 454 3 31 2 5 44 3562
Krabi 2 762 2 180 – – – – 3 179
177
Phuket 3 200 7 160 1 12 – – 13 592
Ranong 27 231 8 192 2 10 11 69 27 231
Trang 1 ... 1 2 – – – – 8 23
Satul – – – – – – – – 3 177
Total 38 1400 29 988 6 53 13 74 98 4764
Source: DDPM.
7/10/10 15:38:35
that were hardest hit. Over 30 000 people, comprising military person-
nel, policemen, volunteers, and 36 helicopters and six vessels from the
Royal Navy, participated in the emergency relief activities. Rescue teams
with search equipment came from a variety of places, including France;
Germany; Hong Kong, China; Japan; Singapore; the Republic of Korea;
Taipei,China; Italy; and the US. Local roads were repaired almost imme-
diately to allow delivery of aid to the disaster areas. Telephone commu-
nications and electricity distributing systems in Phuket, Phang Nga, and
Krabi were quickly restored and were back to normal within a few days.
This immediate restoration of logistic infrastructure helped to improve the
speed and coordination of aid delivery.
The search for bodies and human remains was also undertaken
immediately. Searches were carried out to locate bodies buried under
damaged buildings, in the sea, and in the mangrove forest areas. An
extensive process of identifying human remains using DNA techniques
was undertaken to deal with the large number of unidentified bodies.
The identification process was supported by volunteers and NGOs, who
worked tirelessly in a corpse-clearing centre established at the temple of
Wat Yanyao in Phang Nga. By October 2005, the forensic teams had been
able to identify 4148 bodies, while 1247 bodies still remained unidenti-
fied.5 The next priority was to set up a centre to take care of over 34 000
tourists, including both Thai and forty foreign nationalities, and to help
them return home. (Some tourists were provided with airfares to return
home.)
The United Nations warned that the secondary impacts of the disaster
could be deadlier than the first: people faced health risks due to contami-
nation of drinking water and devastation of health care infrastructure.
Close monitoring by the Ministry of Health helped to contain infectious
diseases, while a mental health care program was successful in preventing
suicides of traumatized survivors.
The scale of the disaster in Thailand was relatively small compared
to other tsunami-affected countries such as Indonesia and Sri Lanka.
Nevertheless Thailand faced complex logistical tasks and coped relatively
successfully with the challenges. Thailand’s success in the immediate relief
effort was attributed to a number of factors such as (1) the synergy gener-
ated by the Thai community in the provision of many forms of assistance,
(2) the close collaboration among civil, military, and police authorities,
NGOs, charitable foundations, and civil volunteers, and (3) the influx
of support and humanitarian assistance from international communities
and NGOs (World Conference on Disaster Reduction (WCDR) Thailand
Country Report (2006)).
The challenge following the successful delivery of immediate relief

Thailand 179
was to implement rehabilitation and reconstruction activities to help the

tsunami survivors to cope with immediate economic problems and move
on to rebuild shattered livelihoods.
SHORT-TERM ECONOMIC IMPACT
The immediate economic impact of the tsunami was felt most acutely
in the tourist industry, and to a lesser extent in the fisheries sector. The
extensive damage to buildings – particularly tourist hotels – and the nega-
tive impact on potential tourists of the traumatic events associated with
the death and destruction following the tsunami was expected to have a
substantial negative effect on the overall economy. The consequences of
an absence of tourists for even one year would have been devastating for
both the tourist industry and the wider regional economy because each
occupied hotel room translates into many related economic activities, gen-
erating employment for both local and migrant workers.
The initial assessments of the impact of the tsunami on the Thai
economy can be gauged by the movements in the Thai stock market. Stock
prices reflect investor expectations about the present value of the expected
future stream of dividend payouts derived from corporate profits. The
tsunami had an immediate impact on the Thai stock market. The overall
security exchange index (SET) fell during the first few trading days after
the disaster, reflecting concerns about the longer term impact on the Thai
economy. But market participants, after this initial (over)reaction to
the tsunami, revised their assessments and concluded that the economy
would not suffer much from the tsunami in the long term. The SET index
rebounded within a week, though the stock price index relating to the
tourism industry was depressed longer, faced with a continuous bombard-
ment of bad news. Nevertheless, as the market reassessed the damage
even the tourism industry index recovered within a month. By the end of
January 2005 it had even exceeded its pre-tsunami level, rising in line with
the SET index.
The investor assessment of the long-term economic impact of the
tsunami was, however, more optimistic than the early assessments of most
official and private sector analysts. As already mentioned, JP Morgan
predicted a zero growth rate for the first quarter of 2005, while both JP
Morgan and Morgan Stanley revised downward their annual growth
forecasts by 0.3 per cent. The Bank of Thailand also projected a reduc-
tion of annual GDP growth by 0.3 per cent due to the tsunami, even after
taking into account the growth momentum of the last quarter in 2004, and
expected compensating effects of soft loans and other assistance. In the

worst-case scenario, if no tourists were visiting the affected areas, GDP

was projected to decline by 1.3 per cent.
The tourism industry in the affected provinces experienced a significant
negative impact in the immediate post-tsunami period. This was caused
mainly by a fall in tourist arrivals rather than because of damage done to
hotels and other tourist infrastructure (Table 6.6). The key issue therefore
was not so much the rebuilding of tourism infrastructure – important as it
was – but how to encourage tourists to return.6
The first quarter growth rate of 2005 turned out to be a robust 3.3 per
cent, but the annual growth rate fell to 4.5 per cent, significantly lower
compared to the 6.2 per cent growth achieved in 2004, and much lower
than predicted by analysts.7 The current account recorded a deficit of
US$6.4 billion in the first seven months of 2005 compared with a surplus
of US$3.4 billion a year earlier.8 Inflation rose from 2.7 per cent in 2004 to
4.5 per cent in 2005 and the trade deficit widened to 8.5 per cent of GDP.
The current account surplus of 1.7 per cent of GDP in 2004 turned into a
4.4 per cent deficit in 2005.
However the downturn in tourism alone could not have caused the
very large fall in the GDP growth rate. The tourism industry contrib-
utes only 6 per cent to Thai GDP and the six tsunami-affected provinces
accounted for only 30 per cent of Thailand’s total tourism income. The
tsunami did not destroy all hotels (or the fishing industry) in the six prov-
inces. Moreover, other tourist attractions on the east coast of the Gulf
of Thailand remained intact and the industry as a whole proved to be
resilient. But in 2005 the Thai economy was badly affected not only by the
tsunami but also by drought, ongoing insurgency in the south, rising oil
prices, and a slowdown of global trade. The main cause of higher inflation
was high oil prices. The combined effect of these problems was reflected
Table 6.6 Hotel industry six months after the tsunami (Jan.–June)
Phuket Phang Nga Krabi

2004 2006 % 2004 2006 % 2004 2006 %
No. hotels 616 457 226 149 55 263 290 288 21
No. rooms 31 29 26 5 1 269 10 9 211
’000
Occupancy 63 27 257 56 31 245 51 21 259
rate %
Duration 3.57 3.16 ... 1.66 1.41 ... 2.86 1.94 21
(day)
Source: Tourism Authority of Thailand.

Thailand 181
in a sharp deterioration in the trade and current account. According to

several estimates, the tsunami was probably responsible for only a 0.3 per
cent reduction in Thailand’s GDP growth in 2005.
Thus the early predictions tended to exaggerate the expected adverse
economic impact of the tsunami. Indeed, arguably the overly pessimistic
forecasts made in the immediate aftermath of the tsunami may have had
the unintended consequence of eroding consumer and business confidence
and depressing business activity, contributing to the aggravation of the
economic slowdown.

RECOVERY
In the immediate aftermath of the tsunami, relief and reconstruction

became the focus of a massive national effort. The overall government
budget allocation for tsunami relief and reconstruction was nearly US$1.7
billion (Table 6.7). The government set aside US$112 million for immedi-
ate tsunami relief, 76 per cent of which was allocated to emergency relief
and mitigation measures in the six provinces. Around 14 per cent of the
relief budget went to projects for reviving the tourism industry in the
Andaman areas, 10 per cent for rehabilitation of natural resources, and
a relatively small proportion (less than 1 per cent) for installing an early
warning system. Subsequent rehabilitation measures were allocated an
additional US$73 million.
The Thai government initially allocated only US$8.3 million to public
infrastructure reconstruction. This relatively small budget reflected the
low level of assessed damage to infrastructure. The largest budget alloca-
tion was to provide assistance to large entrepreneurs by way of soft loans.9
Table 6.7 Budget allocation for tsunami relief classified by measuresa
Measures US$ mn
Emergency measures 112
Relief measures for large entrepreneurs 1487
Rehabilitation measures 73
Reconstruction of infrastructure 8
Total 1681
a
Note: As of 16 November 2006.
Source: Tsunami Help and Recovery Information System (THRIS).

Relief measures for large entrepreneurs included the Bank of Thailand’s

soft loans, which were extended to commercial banks for lending to large
companies in the three provinces. These loans amounted to around 90 per
cent of the total budget.
A US$75 million ten-year tsunami recovery fund was set up in February
2005. The fund was managed by Mutual Fund Corporation Asset
Management and funded by the Government Savings Bank, the Stock
Exchange of Thailand, and the Thai Bankers’ Association. Tsunami-
affected firms could get assistance either in the form of loans or by sharing
equity with the fund. The loans were made available at a 1 per cent interest
rate for the first five years before reverting to market interest rates. The
expectation was that reconstruction of hotels would be completed before
the tourist high season at the end of 2006. In total, this fund amounted to
around 6 per cent of total relief measures for large entrepreneurs.
Public Infrastructure
Figure 6.2 shows the actual expenditures on various categories of public

infrastructure reconstruction compared with estimated values of damages
in November 2006. In every category, the allocated funds exceeded actual
expenditures, suggesting that the availability of finances was not a criti-
cal constraint on reconstruction. The expectation was that infrastructure
reconstruction would be completed without any major funding problems.
Various government and private agencies were allocated responsibility
for repairing or rebuilding houses in each province. Households could also
6000
5000
4000
3000
2000
1000
0
Piers and Roads Light and water Bridges
dykes supply
Value of damage Value of reconstruction
Source: Tsunami Help and Recovery System (THRIS), November 2006.
Figure 6.2 Infrastructure damage and reconstruction (US$ ’000)

Thailand 183
opt to get US$750 in aid to rebuild their own houses. As shown in Table
6.8, residential house construction was largely complete by mid-2006.
In Satul, where housing damage was small, the local government took
on the house-building responsibility, while in Trang, where there were
only 39 requests for new houses, the National Housing Authority under-
took the task. Private companies were allocated the rebuilding of 127 new
houses in Phuket. In Ranong, the Air Force took care of building 167
houses while the Defence Ministry took charge of building 375 houses in
Krabi. The Army and the Navy were responsible for completing the con-
struction of 2850 houses in the worst-damaged area, Phang Nga.
However, as we shall discuss later, although the physical demand for
new houses was met, villagers who moved into these new houses were not
always entirely happy with their new living quarters.
Cost Escalation
An interesting feature of Thailand’s reconstruction experience is the

fact that the physical reconstruction effort had little discernible effect on
increasing construction costs. In fact, construction costs actually declined
during 2005. This contrasts sharply with the experiences of Indonesia and
Sri Lanka.10
The reconstruction activities certainly increased demand in the affected
regions for construction materials and labour. This was reflected in the
opening of a large number of construction material shops in the affected
areas. However, higher demand did not lead to price increases. It is
Table 6.8 Housing reconstruction
Province Destroyed Damaged New houses

(units) (units)
Demand Completion
Krabi 396 262 375 375
Phuket 742 291 127 127
Phang Nga 1 904 604 2 850 2 850
Trang 34 156 39 39
Ranong 224 111 167 167
Satul 2 80 – –
Total 3 302 1 504 3 558 3 558
Note: 552 households opted for US$750 in aid to rebuild their own houses.
Source: DDPM (damage data reported on 15 February 2005, rates of completed

construction data reported in June 2006).

important to note that the tsunami-affected areas were not very far from
the metropolitan Bangkok region and that the overall reconstruction activ-
ity was small relative to the size of the Thai economy. Moreover, the higher
demand for inputs into the construction sector came at a time when the
construction sector at the national level was somewhat depressed because
an overall slowdown in economic activity was tending to push prices down.
There was considerable excess capacity in the main input markets for con-
struction. Substantial excess capacity in the steel industry led to declining
prices of steel products while prices of wood and wood products rose less
than 5 per cent during 2005. Even though higher oil prices exerted some
upward pressure on most materials, prices of essential raw materials such
as cement and steel remained subdued during the reconstruction period.
Overall, the magnitude of the demand effect was not sufficient to increase
prices because of the elastic supply of construction inputs.
Livelihoods
The second-round effect of the tsunami hit when victims lost their liveli-
hoods. This occurred either because the capital equipment they used in
their jobs was destroyed (as in the fisheries sector) or because they lost jobs
in the tourist sector due to hotels being damaged or cuts in employment
following falls in tourist numbers (even though some workers were willing
to accept pay cuts to keep their jobs).
The government addressed the plight of unemployed workers through
various employment programs (Table 6.9). The employment project, aver-
aging an expenditure of US$130 per person, was the most active program
set up to generate short-term livelihood support; as of November 2006,
it had cost around US$3 million and benefited almost 24 000 workers.
In terms of total expenditure, the second most important project for the
unemployed was the job training project, which cost US$43 per head.
However, unemployment was expected to be essentially short-term and it
is not clear whether workers temporarily displaced from their normal occu-
pations (tourism industry and fisheries, for example) were likely to gain
much benefit from training for alternative occupations. The job creation
project had the highest cost per head (US$254) but could accommodate
fewer than 1000 workers, while the project supervised by the Department
of Labour and Welfare Protection spent only US$30 per head.
Impact on the Tourism Industry
Tourism was the key industry in terms of employment. It had been on a

steady growth path prior to the tsunami. Revenue from tourism in Phuket,

Thailand 185
Table 6.9 Thai government support to unemployed workers
Totals
(Dec 2005) (Nov 2006)
Employment project
Budget (US$ ’000) 2 809 3 110
Number of beneficiaries 22 000 23 958
Job provision
Budget (US$ ’000) 10 10
Labour transferring service
Budget (US$ ’000) 9 9
Job creation project
Budget (US$ ’000) 222 238
Number of beneficiaries 760 936
Job training project
Budget (US$ ’000) 1 096 1 097
Dept of Labour Protection and Welfare
Budget (US$ ’000) 980 1 024
Total
Budget (US$ ’000) 5 126 5 487
Source: THRIS, 23 November 2006.
Krabi, and Phang Nga had been increasing steadily. But the December
2004 tsunami sharply interrupted this growth. Following the tsunami,
revenues fell dramatically in 2005 (Figure 6.3).
The primary reason for the drop in tourism was not actual physical
damage to tourism infrastructure but the reluctance of tourists to visit the
tsunami-affected areas. Phuket suffered the steepest fall despite the fact
that its hotels were less damaged than those in the other two provinces.
The number of tourists in Phuket dropped sharply in January – when
there were almost no tourists – and continued to be low throughout 2005
(Figure 6.3). The drop in tourism led to considerable unemployment in
these areas.
Fortunately the falls in tourism in the affected regions were to some

2500
2000
1500
1000
500
0
1997 1998 1999 2000 2001 2002 2003 2004 2005
Phuket Krabi Phang Nga
Figure 6.3 Tourism revenue in three provinces (million US$)
extent compensated for by increases in tourist arrivals in other parts of the

country because only a small portion of Thailand’s hotel industry was seri-
ously affected by the tsunami. There are other beaches in different parts of
Thailand, particularly along the Gulf of Thailand, which are reasonable
substitutes for those of the Andaman areas. Tourists also had the option
of switching their visits to northern Thailand.
The consequence was that while there was a significant decline in the
hotel occupancy rate in the south, there were increases in occupancy rates
in other parts of Thailand – particularly Bangkok (Figure 6.4). The result
of the substitution of the Gulf of Thailand for the Andaman coast as a
tourist destination can be seen by the tourism boom in Koh Samui and
some other resort areas on the east coast of Thailand. In 2005 the hotel
occupancy rate in Pataya grew by 28 per cent. The result was a boom in
demand for land in these alternative tourist destinations. By March 2006,
the land price in Koh Samui had gone up nearly sevenfold from 37 500 to
250 000 baht per rai (0.625 hectare). Hotel chain operators and investors
drove up property values as the demand for hotel accommodation in these
areas exceeded available supply.
Tourist arrivals numbers in the tsunami-affected areas began to increase
in 2006. Two years after the tsunami the tourism industry was close to
regaining its earlier level of activity. Airlines that cancelled flights to
Phuket after the tsunami had returned, including those from Australia,
the Republic of Korea, Singapore, and Europe. In addition, new airlines

Thailand 187
80
60
40
20
0
North Bangkok Central East Northeast South
2005 2004
Figure 6.4 Hotel occupancy rate in 2004 and 2005 (per cent)
started direct flights to Andaman areas. In the second half of 2006, Hong
Kong Express started to operate two flights a week from Hong Kong,
China to Phuket. Thai Airways resumed twice-weekly flights from the
Republic of Korea to Phuket in an attempt to encourage high-end Korean
tourists to return to Phuket. Targeted tourists included golfers, spa visi-
tors, honeymooners, and families. Phuket’s private sector went on a road
show to attract tourists from new markets in India, the Middle East, and
Russia. All of these private sector initiatives helped the industry recover
within a year of the disaster.
The return of many airlines and the arrival of new airlines reflected a
recovery in the tourism sector. Another indicator of the rapid recovery in
tourism was the low level of non-performing SME loans. The SME Bank
reported in March 2006 that 523 business operators had borrowed special
loans totalling 19 million baht from the SME banks. These were loans
with a concessionary interest rate of 2 per cent per year. Thirty-one opera-
tors had repaid all their debt within one year. All borrowing enterprises
paid interest on schedule.11
Damage to Coral Reefs
Initially, there were fears about the impact of the tsunami on the coral reefs.
The reefs are a precious natural resource important for both the tourism
and fisheries industries as well as for the wider ecosystem. Fortunately,
according to the Phuket Marine Biological Center, only coral reefs in
shallow waters were damaged by the tsunami, meaning that only 5 per

cent of the coral reefs in Phuket were destroyed. Moreover, some corals,
such as ‘branchy’ corals, were expected to recover within three years,
while ‘bunchy’ corals were expected to recover within ten years. Hence
the indications were that there was no serious long-term damage to the
quality of coral reefs. However, the Food and Agriculture Organization
(FAO) warned that there could be other long-term impacts on the coastal
ecosystem. The dense mangrove forests hit by the tsunami were damaged,
and the freshwater swamp forests were also destroyed by saline water
intrusion. These needed rehabilitation to ensure long-term sustainability
of the ecosystem and protection from future disasters (FAO 2005).
Tsunami Warning System
On 26 December 2004 the Pacific Tsunami Warning Center detected

the massive earthquake that triggered the tsunami and warned of the
approaching giant waves. However there was no official alert system in
the region. There is now widespread recognition that an early warning
system is an essential part of preparations for coping with disasters. The
National Disaster Warning Center (NDWC) has an agreement with the
Asian Disaster Preparedness Center (ADPC) to exchange real-time data
from sea-level observations and seismic monitoring systems. Cooperation
among countries in the Andaman region to share information can provide
a valuable public good that can save lives and mitigate unwarranted fears
of future tsunamis. In early December 2006, a ‘Deep Ocean Assessment
and Report of Tsunami’ (DART™) buoy costing US$5 million was
installed in the centre of the Andaman Sea, 1100 kilometres west of Phuket
and 925 kilometres east of India.12 The deep-sea buoy was designed to
detect tsunami waves and send signals to warning centres in countries in
the region. The NDWC is responsible for alerting the public in Thailand
after receiving a signal from the buoy.
But a high-tech network of sensors and buoys will not be effective if
there is no effective communications link to coastal communities at risk
of being hit by a tsunami. In an effort to build up an ‘alert system’ in local
communities, the Thai Public Works Department completed the construc-
tion of 55 tsunami warning towers by June 2006 in the six provinces. The
construction of ten warning towers along the Andaman coast was also
planned. The total budget for the construction of the towers was less than
1 per cent of the total budget for the warning system, reflecting the capital
intensive approach of the installed system.
The extent to which this warning system will build confidence among
village communities and tourists over the longer term is unclear.
Observation towers and signs pointing to escape routes may generate a

Thailand 189
confidence among villagers and tourists. It remains to be seen whether

tourists, encouraged by this warning system, will feel safer and will return
to these locations.
AID AND ASSISTANCE
Thailand was not as severely affected as Indonesia or Sri Lanka by the

tsunami but it attracted much international media attention because of the
large number of foreign tourists caught up in the tragedy. Furthermore,
the areas hit by the tsunami included famous tourist destinations. Thus
Thailand was inundated with offers of assistance from governments,
multilateral donor agencies, corporate and community groups, and indi-
viduals. Philanthropy was shown to exist among both large and small
corporations, and among both the rich and the poor.
The immediate response to the disaster can be considered a success.
However poor coordination among aid donors hampered effective deliv-
ery and distribution. There were many instances of wasteful aid. Some
donations of food and clothing were wasted because they were not appro-
priate for Muslims. Some houses constructed by the military were not
appropriate for the lifestyle of fisherfolk. Many of the inefficiencies in aid
programs reflected the problems of supply-driven assistance which some-
times passed over the particular needs of people whom the donors said
that they wished to assist.
The Thai government turned down offers of financial assistance from
foreign governments, including offers of debt relief from Europe, though
it accepted technical assistance. The rationale given was that Thailand
wanted funds to be given to other countries in more difficult circum-
stances, such as Indonesia. It is also likely that the government wanted to
send a message to the global investor community concerning its financial
stability, fearing that acceptance of debt relief might hurt Thailand’s
credit rating and thus raise Thai borrowing costs and discourage capital
inflows.
Foreign Assistance
However, as seen in Table 6.10, following the tsunami Thailand received

significant assistance from a range of foreign donors. This included
technical assistance from foreign governments. The total amount of aid
committed was US$131 million, ranging from contributions of US$5000
to US$27 million. This foreign commitment was around 10 per cent
of Thailand’s tsunami-related budget. The government also received

Table 6.10 Contributions from international donors at end-2006 (US$)
International partner Committed Disbursed Disbursed

(US$ mn) (US$ mn) (%)
Main donors
FFEM (Fond Francais pour 27.4 – –
l’Environnement Mondial)
United States Agency for 21.1 3.0 14
International Development
World Vision 20.0 7.0 35
Australia, Department of Foreign 12.2 12.2 100
Affairs and Trade
United Nations Children’s Fund 9.8 9.8 100
Norway 7.9 7.9 100
Other donors
Adventist Relief and Development 0.5 0.5 100
Agency (ADRA)
The Asia Foundation 0.5 0.5 96
AusAID 0.8 0.8 100
Danida 3.2 1.4 45
Embassy of Italy 1.2 1.2 100
Entraide et Solidarite 0.1 0.1 98
GTZ 1.1 0.4 38
IOM (International Organization 0.2 0.1 57
for Migration)
International Labour Organization 0.8 0.7 85
Office for Coordination of 0.5 0.1 22
Humanitarian Affairs (OCHA)
Swiss Agency for Development and 2.3 1.3 55
Cooperation (SDC)
Terre des Hommes – Italy 0.7 – 0
Sustainable Tourism Development 1.2 1.2 100
Consortium (STDC)
The Australian Federal Police (AFP) 3.1 3.1 100
The Austrian NGO Hilfswerk, 0.8 – 0
Austria
UN OPS 0.2 0.2 100
United Nations Development 5.2 5.2 100
Programme
United Nations Population Fund 0.9 0.8 89
World Bank 4.9 4.9 100
World Food Programme 0.5 0.5 100

Thailand 191
International partner Committed Disbursed Disbursed

(US$ mn) (US$ mn) (%)
World Health Organization 3.0 3.0 100
World Vision Canada 1.5 1.5 100
All others (13 agencies) 0.6 0.4 63
Total 132.0 67.6 51
Source: Thailand International Development Cooperation Agency (TICA).
substantial donations from the corporate sector, estimated at US$50–60

million in 2005 (Bernhard et al. 2005).13 This amount is quite substantial
when compared with the amount contributed by international donors.
Nearly all large foreign companies operating in Thailand provided some
type of contribution within a short period following the disaster. Overall,
around 80 per cent of the total amount donated came from donations
larger than US$250 000. These larger donations came primarily from large
organizations and corporations. Contributions of less than US$25 000
accounted for about 8 per cent of total contributions.
Delivery of Assistance: Speed and Efficiency
Emergency assistance to tsunami survivors was delivered quickly.

Government officials and volunteers were able to reach affected areas
immediately after the tsunami because basic infrastructure was not totally
damaged and access to affected areas remained open. Moreover, relief
agencies and individuals were able to reach disaster areas without having
to obtain prior permission from provincial governments.
In the early relief phase, aid disbursement was rapid. Disbursement was
20 per cent of the total fiscal budget within two months of the disaster. The
rate went up to 70 per cent by the end of the first year, an acceptable rate
in the circumstances. However, disbursement in the second year slowed
down. It seems that by the end of 2006 it may not have been higher than
80 per cent.
Of course some types of financial assistance can and should be spent
faster than others. The disbursement rates of government funds for
various categories varied (Table 6.11). Funds to provide aid to foreign
tourists (medical care, helping those who lost their belongings, helping
them to return home, and so on) were completely utilized. On the other

Table 6.11 Financial assistance provided by the Thai government
Sub-Committee on PM Office Assistance Amount Disbursement

Assisting Fund and Central disbursed (%)
Budget (US$ mn) (US$ mn)
1 Foreign tourists 2.2 2.2 100
2 Affected victims 20.5 19.5 95
3 Affected fishers 20.7 14.5 70
4 The unemployed 5.3 5.4 97
5 Small vendors 5.3 5.2 99
6 Accommodation 2.5 2.3 89
7 Affected students 21.3 11.3 53
Total 78.1 60.4 77
Source: Office of Prime Minister Website, November 2006.
hand, assistance to students – less urgent – had the lowest disbursement.

Disbursement was also slower for assistance to fishers.
The disbursement rate of foreign pledges varied a great deal. As of
November 2006, the disbursement was only 50 per cent. Some pledges
(Table 6.10) had not been disbursed at all. Larger donations with com-
mitments of US$20 million or more (for example, FFEM, USAID, World
Vision) seem to have had a slower disbursement rate. It is not surprising that
large donations tended to be disbursed more slowly because the objective of
the pledges was to achieve longer term rehabilitation. Further, speeding up
the disbursement of the large amounts of money with no effective monitor-
ing and careful evaluation would have created problems of accountability.
Zero disbursement rates were related to small amounts of donations.
Aid Delivery: Equity Issues
Issues arose over the way in which assistance was to be distributed. As

noted earlier, damage to fisheries accounted for about 12 per cent of total
damage while various organizations contributed compensation of about 32
per cent of total fishery damage. However the distribution of compensation
did not correspond to the actual damages. Fishers in Phang Nga who suf-
fered 50 per cent of the total damage received only 30 per cent of the total
value of aid. In contrast, Satul’s share of damage was only 6.6 per cent but
the area received 39 per cent of total compensation. Krabi fisheries, with
65 per cent of total compensation, also received much more than their
fair share. It may be noted here that Phang Nga is the home of minority
ethnic groups who may not be given the highest priority. In addition, some

Thailand 193
Table 6.12 Financial assistance to enterprises
Units US$ mn
Large enterprises
Soft loan 7 014 997
Financial institution credit 2 068 31
Mutual fund 36 60
Social security fund 6 2
Total 9 124 1 089
Small and medium enterprises
Financial aid 10 718 5
Source: THRIS, 23 November 2006.
of them had not obtained Thai citizenship or other necessary documents.

Uneven disbursement might also have been due to the allocation of budgets
by central and local governments among affected provinces.
Arguably, there may be a similar issue with regard to the provision of
loans supplied to firms to help revive businesses. Large hotels that suffered
heavy losses received government subsidies in the form of loans at con-
cessionary rates; in total, large enterprises received financial injections of
over US$1 billion (Table 6.12). In contrast, around 10 000 SMEs received
a total of around US$5 million. It is not clear what criteria were employed
in deciding the allocation of funds between large enterprises and SMEs,
whether this was the best means of helping to revive the tourism industry
of the Andaman coast, or whether the marginal product of capital injected
into large enterprises is higher than that of SMEs. The employment effect
of assisting SMEs versus large enterprises, too, was a factor that might
have been considered.
Public Assistance, Insurance, and Credit Markets
This raises a longer term issue about the impact of public sector provi-
sion of assistance to business enterprises. The question is whether private
sector enterprises will bother looking for private insurance if they are
provided with (or can assume that they will get) public assistance for dis-
asters. Kunreuther and Pauly (2006) show that public disaster assistance
is a form of insurance that is suboptimal when compared to insurance pur-
chased before the disaster. Firms maximize expected profits by taking into
account insurance premiums and the expected extent of public assistance.
Mandatory comprehensive private disaster insurance with risk-based rates

can help minimize costly and poorly targeted disaster assistance. An ex ante
public coverage program to cover catastrophic losses and to subsidize insur-
ance coverage for small and medium firms can be more efficient than costly
ex post relief programs. From a public policy perspective, preparations for
disasters should involve assessments of how disaster insurance markets can
be developed and how private firms can be induced to invest in disaster
insurance.
In this context, policies to cope with natural disasters need to address
issues raised by the underdeveloped nature of financial and capital
markets in developing countries and the restricted access of the poor to
such markets. Natural disasters typically hit the poor hardest. Those
engaged in small and micro-enterprises, including craftspeople, small
shopkeepers, and fisherfolk, require credit to replace their equipment and
inventories to re-start businesses. In this context, microfinance appears
to have a major role to play. However, the Grameen Foundation USA,
which looked into the availability of microfinance in the tsunami-affected
areas, did not find NGOs or other organizations offering micro-lending
services. The Foundation believes that poverty hindered the development
of effective micro-lending initiatives, particularly in the south (Counts et
al. 2005).14 We revisit this issue below.
Assistance to Children
Thousands of children lost both parents following the tsunami. The Thai
government provided financial aid to almost 1500 orphans and almost
27 000 other children (Table 6.13). Most of those orphaned were from the
six affected provinces; some were from other locations whose parents had
been working in the tsunami-hit areas. The government provided orphans
with clothes and educational materials, including scholarships through
to university level. The response of the government in terms of providing
access to education was swift. Most schools were able to re-open almost
immediately (on 4 January 2005). Attendance was initially low but soon
returned to pre-tsunami levels. However for these affected children, par-
ticularly orphans, the impact of the tsunami was obviously not confined
to the short term. Recognizing this, psychological support was provided
through a broad community-based psychosocial recovery program to
mitigate the negative impact on children’s learning.
Assistance for Trauma and Stress
The impact of the tsunami was not confined to physical and economic
losses. The trauma associated with loss of family members, relatives, and

Thailand 195
Table 6.13 Financial assistance from Thai Ministry of Education
Province Orphans Affected children

Number Aid (US$) Number Aid (US$)
Krabi 119 73 800 5 577 2 091 050
Phang Nga 630 393 175 6 127 2 297 625
Phuket 177 110 625 2 608 977 675
Ranong 87 54 375 2 278 852 950
Satul 13 8 125 5 116 1 918 500
Trang 29 18 125 4 432 1 662 000
Other provinces 441 275 625 854 320 250
Total 1 496 933 850 26 992 10 120 050
($ per child) 624 375
Source: THRIS.
Table 6.14 Mental health services for tsunami victims (26 December 2004–
4 May 2006)
Province No. of services Types of services

Psychiatric Counselling Medical
drugs treatment
Krabi 3 664 839 3 799 1 114
Phang Nga 9 984 3 349 9 898 3 335
Phuket 2 600 634 2 669 833
Ranong 1 484 178 1 364 316
Satul 704 273 226 458
Trang 614 6 594 156
Total 19 050 5 279 18 550 6 212
Source: Mental Health Center for the Thai Tsunami Disaster.
friends, as well as loss of physical assets and livelihoods, imposed heavy

economic and psychological pressures on survivors. It was reported that
some fishers, for example, suffered from hallucinations and paranoia
and were unable to go back to sea. Attempted suicides and symptoms of
acute stress and other mental problems were also widely reported (Table
6.14).

Social Tensions
Many disputes threatened social cohesion in the affected communities.

Many villagers, already depressed by misfortune, faced disputes over land
ownership. More than 20 per cent of affected villages experienced some
land disputes. Many traditional owners – villagers and ethnic communi-
ties – did not have secure legal title to their land. In the aftermath of the
tsunami many found themselves locked into disputes, both with local
governments (who wanted to maintain land for public use and to protect
the environment) and with developers (who wanted to obtain prime land
along pristine beaches for commercial purposes).
Conflicts also arose because of perceptions that assistance had not been
delivered in a fair way. In the early phase of relief assistance, there was a
strong emphasis on speedy delivery of aid which sometimes meant that
some needy people missed out on assistance. In some cases when the aid dis-
tributors arrived in a village, some people did not receive assistance because
they were elsewhere searching for their family members. Irrespective of
the reason, for people already traumatized by the disaster, perceptions of
unfair treatment tended to exacerbate community tensions.
COMMUNITY PERCEPTIONS AND BEHAVIOUR:

RESULTS FROM A FIELD SURVEY
A key part of this study was a field survey of affected communities in the three
most severely affected provinces. The aim was to try to understand behav-
ioural adjustments of families affected by the tsunami so as to draw lessons
of wider relevance for policy formulation for natural disaster management.
Primary data was obtained from a sample survey of 262 displaced and
non-displaced individuals, 37 visitors (tourists), and seven NGOs. The
survey was designed to gain insights into aspects of the disaster manage-
ment process from the point of view of affected communities, tourists, and
non-government agents such as NGOs. In particular, we were interested
in obtaining community perceptions regarding the effectiveness of aid in
terms of availability, distribution, speed, and targeting among various
groups of occupations, and whether assistance may have adversely affected
incentives for self reliance by creating an ‘aid-dependency’ syndrome.
Survey Methodology
The survey was conducted in June 2006. It covered the three provinces
severely affected by the tsunami and included 296 respondents. There were

Thailand 197
Table 6.15 Survey sample: composition and distribution
Phuket Phang Krabi Total %

Nga
Diversified households (H) 6 53 13 72 24
Fishers (F) 8 23 5 36 12
Entrepreneurs (E) 11 17 8 36 12
Labourers (L) 11 17 8 36 12
Beach vendors (B) 11 17 8 36 12
Tourists (T) 11 18 8 37 12
NGOs 0 7 0 7 2
Moken (M) 0 36 0 36 12
Total (numbers) 58 188 50 296
Per cent (%) 20 64 17 100
Source: Thailand tsunami survey, three Thai provinces, conducted by chapter author,
June 2006.
eight individual sample categories: Diversified Households (H), Fishers

(F), Entrepreneurs (dependent mainly on tourism) (E), Labourers (L),
Beach Vendors (B), Tourists (T), and Moken (an ethnic minority tribe of
‘sea gypsies’ who comprise a small fishing community in Phang Nga) (M),
as well as seven NGOs from Phang Nga province. The sample distribu-
tion is shown in Table 6.15. The sample size in each province was roughly
proportional to the loss of life in each province, taken as an indicator of
the severity of the impact of the tsunami. The group sample sizes do not
strictly correspond to their proportions in the population.
The families included in the Diversified Households group had family
members engaged in a variety of occupations, including general service
providers, fishers, housewives, and traders. Thus, while some of these
household members followed occupations similar to those of the main
income earners in the various occupational categories, the households
as a whole had more diversified income sources. Twenty-three fishing
households (Fishers) were randomly selected from Phang Nga, eight
from Phuket, and five from Krabi. Those in the Entrepreneur category
were mainly small business operators involved in tourism-related busi-
nesses such as restaurants, shop houses, and guest houses. The Labourer
category included those who were employed in hotels, restaurants, shop
houses, department stores, and local administration. Beach Vendors pro-
vided various services to tourists on the beach such as renting out beach
umbrellas and chairs and selling food. The activities of NGOs were con-
centrated primarily in Phang Nga province where the need for assistance

was deemed to be strongest. The sample was drawn entirely from that
province. The aim was to ensure that NGOs could provide their own per-
spective to balance that provided by community groups. The Moken are
fisherfolk who also provide construction labour and engage in petty trade.
They were included as a separate category to assess their perceptions as an
ethnic minority group regarding any bias or discrimination in the provi-
sion of assistance.
Overall, the sample was reasonably gender balanced (52 per cent males,
48 per cent females) but there was considerable variation among different
groups. There were significantly more male respondents than females in
the Fisher and Labourer categories (81 per cent and 58 per cent, respec-
tively) while there were more females within the Entrepreneur (64 per cent)
and the Moken categories (56 per cent). In other categories (Diversified
Households and Beach Vendors) the gender numbers were approximately
equal.15
Half of the surveyed Entrepreneurs and around a third of Diversified
Households and Beach Vendors were new migrants to these areas, in con-
trast to nearly 80 per cent of the Fishers and almost all of the Moken being
natives of the areas.
Tsunami and Asset Losses
The survey provided a household-level perspective on how the tsunami

affected households (Figure 6.5). Some families in each group lost family
members while most lost some assets. The way in which affected families
adjusted to post-tsunami life and coped with the many economic and non-
economic challenges they had to face was conditioned by these two, key,
traumatic driving forces: loss of family members and asset destruction.
Respondents were asked to approximate the damage on their property as
a percentage of their total assets. In relative terms, Moken were the worst
affected by asset losses, losing almost 80 per cent of their total assets.
Labourers lost 40 per cent of their assets. In the sample, less than 20 per
cent of Fisher families lost family members – the lowest rate among the six
groups – but Fishers were hit hard by asset losses.
Adjustment and Coping with Post-tsunami Reality
Table 6.16 presents information about how families adjusted to the loss
of incomes and livelihoods after the tsunami. Eighteen months after the
tsunami, the incomes of the large majority of families (68 per cent) were
below their pre-tsunami level, while a small minority (15 per cent) experi-
enced an increase in income level.

Thailand 199
90.0
80.0
70.0
60.0
50.0
40.0
30.0
20.0
10.0
0.0
H F E L B M
family with lost members (%) asset loss (% total)
Note: H: households; F: fishers; E: entrepreneurs; L: labourers; B: beach vendors;

M: Moken minority.
Figure 6.5 Death and destruction
Table 6.16 Income changes and patterns of adjustment by category (%)
Diversified Fishers Entre- Labourers Beach Moken Total

households (F) preneurs (L) Vendors (M)
(H) (E) (B)
Incomes
Lower 69 72 86 64 92 53 68
Unchanged 15 17 6 6 6 36 17
Higher 15 11 8 31 3 11 15
Total 100 100 100 100 100 100 100
Of whom:
Borrowed 54 58 53 44 53 19 48
money
Changed 42 36 31 47 33 31 39
occupation
June 2006.
But there were significant differences within the sample categories. Those
who depended heavily on incomes from tourism were the hardest hit: 92
per cent of Beach Vendors and 86 per cent of Entrepreneurs experienced
a decrease in income, followed by Fishers (72 per cent) and Diversified

Households (69 per cent). Surprisingly, the Moken minority suffered the
least from the reduction in income. Only a little over half of them experi-
enced a decline in income level, 36 per cent of them were able to maintain
the same level of income, and 11 per cent actually earned higher incomes.
While 64 per cent of families belonging to the Labourer group had lower
incomes, some 30 per cent reported that their incomes were higher.
More insights into the reasons for these differences can be gleaned from
the ways in which families adjusted their income-earning activities after
the tsunami. Overall, 40 per cent of the sample reported that they had
changed their main occupation. The largest change was in the Labourer
group of whom nearly half took up a new occupation. In contrast, only 30
per cent of Entrepreneurs and the Moken changed occupations.
A variety of factors to do with occupational skill-specificity, adjustment
costs, and alternative job opportunities appear to have been important.
Many Entrepreneurs probably felt that they were able to cope with a tem-
porary fall in income based on the expectation that tourist arrivals would
soon recover. Regarding the Moken, not only were many of them less
dependent on markets for their incomes, but with limited skills they may
also have had fewer opportunities to move into other jobs.
Consumption Smoothing and Access to Credit
An event like the tsunami can be thought of as a temporary shock that

reduces income for a period of time. Of course, if significant asset damage
also occurs, then there is a longer-term impact that reduces household
wealth. However, the large-scale assistance programs generated a percep-
tion that asset damages would be more or less fully compensated through
government and other donor aid. One likely response to income reduc-
tions, particularly when the decline is expected to be temporary, is an
increase in borrowing as families attempt to smooth their consumption.
In the post-tsunami period, despite the availability of some aid and
assistance, nearly half of all households across the different categories went
into debt. However, though over half of the Moken families experienced
an income fall, less than 20 per cent of them went into debt. In contrast,
the number of families who borrowed was highest among the Fishers.
It is possible that some families who wanted to borrow may have been
unable to access credit markets and thus became liquidity-constrained.
This is particularly likely to be the case for those who were asset poor
and hence unable to borrow because of lack of collateral. Arguably, most
Fishers expected that their assets and equipment would be replaced and
hence expected that their income levels would recover after some time.
This expectation may have been shared by many lenders. On the other

Thailand 201
hand, many Moken families were more likely to be liquidity-constrained

because they were probably not seen as good credit risks and hence were
more likely to have been denied access to credit. Further research is
required, however, before any firm conclusions can be reached.
Determinants of Loan Demand
The demand for credit within households was explored using a model
where the demand for credit (amount of borrowing) was considered to
depend on the following factors: the pre-tsunami monthly income (YB)
multiplied by the number of months of unemployment (to proxy the
income gap needed to maintain the pre-tsunami expenditure level), the
cost of borrowing or the interest rate, the loan purpose (business or non-
business), the availability of collateral, and the total amount of financial
aid (TOTAL-AID) obtained from direct aid, relatives and friends. The
detailed results are given in Equation (6A.1) in Appendix 6A.1.
The results indicate that credit demand was positively related to direct
aid amount, availability of collateral, and whether the loan was for busi-
ness purposes, and (as expected) negatively related to the interest rate.
Interestingly, the total cash aid that was received complemented rather
than substituted for total credit demand. The significance of the availabil-
ity of collateral as a determinant of credit demand indicates that tsunami
victims who suffered loss of assets, and thus loss of adequate collateral,
were likely to be liquidity-constrained. Poorer households with no col-
lateral were also likely to be forced into the informal credit market where
interest rates are higher. Such high-interest credit raises the cost of credit
and thereby further reduced the capacity of the asset poor households to
use the credit market for consumption smoothing. In this context, effec-
tive microfinance programs can play an important role by providing credit
to restart microenterprises to those who cannot afford the high interest
loans.
Financial assistance from friends and relatives – from social networks
– can be very important for cash-strapped tsunami victims experiencing
income shortfalls. In the survey, assistance from friends and relatives
accounted for about a third of total financial assistance to households.
However, this was not evenly spread across household categories.
Beach Vendors received the bulk of their financial assistance from rela-
tives and friends while Diversified Households and Labourer households
received about a third of their total assistance from relatives and friends.
On the other hand, outside assistance was by far the most important source
for Moken and Entrepreneur households. In the case of Entrepreneurs, it
is possible that the low proportion of financial assistance from relatives

Table 6.17 Changes in income and occupations (%)
Income Diversified Fishers Entre- Labourers Beach Moken

households (F) preneurs (L) vendors (M)
(H) (E) (B)
New occupation:
Decrease 72 85 83 94 77 42
Constant 15 8 8 0 15 25
Increase 12 8 8 6 7 33
Totals 100 100 100 100 100 100
Maintain previous occupation:
Decrease 60 61 83 42 91 42
Constant 23 26 8 5 4 50
Increase 17 13 8 53 4 8
Totals 100 100 100 100 100 100
June 2006.
and friends was related to several factors: their need for handouts from
friends and relatives to meet living expenses may have been lower; they
had better access to savings; and credit markets and outside agencies,
including the government, may have provided large scale assistance to
restore business assets destroyed by the tsunami.
The Moken community was in a very different situation. If families and
friends were also affected by the disaster, or if their friends and relatives
were quite poor anyway, their capacity to help each other would have been
constrained. In this context, being a migrant may have been an advantage.
Migrants had some chance of assistance from relatives and friends living
at a distance and unaffected by the tsunami. In fact, after the disaster,
the Moken community seems to have recognized the value of being more
integrated with the broader Thai society. Moken people have obtained
Thai citizenship and thereby have better access to formal education for
their families.
Households whose livelihoods have been badly hit by a disaster can
seek alternative employment, provided such employment opportunities
exist. As Table 6.16 shows, a significant number of households changed
occupations. Table 6.17 presents data which shows changes in occupa-
tions enabled the maintenance of income levels within different household
groups. Most households were forced to accept lower incomes whether
or not they remained in the same occupation. This does not mean that

Thailand 203
changing jobs was of no benefit; those who changed jobs did so because
the alternative would have been an even lower level of income or unem-
ployment, and the cost of changing jobs was more than compensated for
by the expected earnings in the new occupation.
For many people employed in the tourism industry, or who depended
on it, there was considerable pressure to change jobs. As described earlier,
the tourism industry was badly hit by the tsunami. As the number of tour-
ists declined, tourist-related businesses were adversely affected and many
hotels and restaurants closed down or scaled back their operations. Job
losses followed. In some cases, workers accepted lower wages in order
to keep their jobs. Those who lost their jobs needed to find new ways to
earn a living. But if their skills were industry-specific it was difficult to find
new jobs that allowed them to maintain their previous incomes. Hence,
many workers who remained in their previous occupations were obliged
to accept lower incomes. Only a small percentage could maintain their
previous income levels.
As tourism began to recover, wages improved for those employed in
the hotel business. There were shortages in specific skilled labour catego-
ries because some of the skilled workers had been killed by the tsunami.
Many Labourer households who were employed in the tourism industry
and remained in their occupation experienced an increase in income by
the time of the survey in mid-2006. But the recovery in tourism was not
yet sufficient at that stage to restore business for Beach Vendors to previ-
ous levels. Over 90 per cent of those who remained in that occupation
continued to have lower incomes even in mid-2006. There was a similar
story in the case of Fishers whose income declined for several reasons.
The tsunami destroyed their boats and fishing nets, limiting their capabil-
ity to fish. In the first few months after the tsunami, fish consumption in
Thailand fell because of public fear that the fish were feeding off corpses
in the sea. Further, the oil price shock in 2005 raised the price of diesel,
a major cost component in the fishing industry. Thus, even when Fishers
were given fishing gear, these various factors constrained their capacity to
fully recover their earlier income levels quickly.
Figure 6.6 shows the share of households in each group that engaged
in borrowing and the share that did not change their pre-tsunami occupa-
tion. Among those who remained in the same occupation, the percentage
of families with debts was high. The share ranged from less than 25 per
cent among the Moken people to more than 50 per cent among Beach
Vendors, Entrepreneurs, Fishers, and Diversified Households. The Moken
families, despite their income reduction, incurred lower debts (possibly,
however, because they could not access credit) and experienced serious
distress. The other surveyed households, in general, had better access to

Moken minority
Beach vendors
Labourers
Entrepreneurs
Fishers
Diversified Households
0 25 50 75
Families with debt (%) Unchanged occupation (%)
Figure 6.6 Debt and unchanged occupation (%)
credit, thus easing the hardship despite their inability to change occupa-
tions. Furthermore, many of those who did not change occupations were
prepared to remain in their occupations in expectation of the recovery of
the tourism and fishery industries. In this case, access to credit was useful
because it helped them to tide over the expected temporary shortfall in
income.
To sum up, it is clear that whether or not they changed occupations,
households affected by the tsunami experienced significant income losses.
But most people saw the tsunami as a temporary shock and expected the
situation would return to more normal levels after time. Because of this,
many felt that it might be best to stay in the same job while waiting for a
recovery. A new occupation was perhaps seen as useful to make ends meet
in the short term but it was unlikely to be seen as the best option in the
long run.16
These patterns of job movements raise the issue of the effectiveness of
the occupational training for the tsunami victims provided by many agen-
cies. These job training programs may not actually have been of much
help. In the first place, people are less likely to look for new occupations
if the current bad situation is seen as only temporary. In any case, for
people to be attracted to new training programs they need to be able to
see a market for the new skills that will provide compensation for the costs
of long-term occupational change. The survey responses reported here
indicated that many people were not convinced that the benefits from such
training were enough to compensate for the costs. There may be a lesson
of general relevance for job training programs in disaster situations: if the
disaster is seen as only a temporary shock, there may be little incentive for

Thailand 205
people to undertake substantial training to prepare for alternative long-

term occupations.
Mental Health Issues: Post-traumatic Stress Disorder, Anxiety and

Depression
A group of Thai and international medical researchers associated with

the Thailand Post-Tsunami Mental Health Study Group documented the
significant mental health problems that affected many tsunami victims.
Their work was based on surveys conducted in February 2005, only a
few weeks after the tsunami, and a follow-up survey in September 2005
(van Griensven et al. 2006). They found a significant incidence of anxiety,
depression, and post-traumatic stress disorder (PTSD) eight weeks after
the disaster. Nine months after the disaster, these problems had dimin-
ished but had not entirely disappeared.
The issue of mental health is not examined in detail in this chapter.
Nevertheless, because information on the mental health problems of
survey respondents was likely to be useful, several questions were included
in the survey for this study that made it possible to construct an index of
mental health.17 Hallucination and paranoia, for example, are symptoms
of post-traumatic disorder. Admittedly, the index constructed in the survey
was not as comprehensive as the Harvard Trauma Questionnaire and the
Hopkins Checklist-25 to detect symptoms of anxiety and depression.
Further, respondents may not have revealed the true state of mental stress,
depression and PTSD eighteen months after the tsunami. For a group, a
mental stress index computed as an average equal to 100 indicated that the
group had resolved its depression and could cope with the stress in a stable
manner. An index closer to 200 suggests that the group members were still
quite saddened by the traumatic experience. A high group index indicated
that hallucinations and paranoia were common, suggesting acute PTSD.
Table 6.18 shows the group averages of the mental stress index along
with some other indicators associated with mental stresses or concerns.
The group averages suggest that, on average, people in the survey group
coped with the effects of the tsunami. They were still affected – ‘sad’ – but
were able to accept the tragedy and cope with it. Even the Moken families,
who had a higher stress index (144), were not in an acute state of stress or
paranoia. However, certainly some individuals within each group suffered
from acute mental problems.
People who lost their assets and properties experienced higher mental
stress. Moreover, in all groups, anxiety and fear of another tsunami con-
tinued to be present among around half of the respondents. In each group
some people reported knowing someone who had attempted suicide, but

Table 6.18 Mental health and related factors
Diversified Fishers Entre- Labourers Beach Moken

households (F) preneurs (L) vendors (M)
(H) (E) (B)
Mental stress 101 94 100 100 125 144
index
Received 0.69 0.81 0.53 0.61 0.58 0.78
consultation
visit
Participated in 0.39 0.58 0.42 0.39 0.53 0.50
tsunami drill
Believed that 0.33 0.36 0.26 0.47 0.33 0.26
community
became more
united
Knew someone 0.21 0.08 0.17 0.11 0.19 0.06
who
attempted
suicide
Expected 0.56 0.61 0.54 0.43 0.53 0.60
another
tsunami
Asset loss 70.35 67.08 59.58 39.58 51.53 76.94
(% total)
June 2006.
the proportion was somewhat lower among Fishers and the Moken people.
Only around half the respondents reported participating in a tsunami drill;
it is not clear if this helped alleviate anxiety and stress.
As mentioned earlier, mental stress was aggravated if social tensions
increased within communities due to perceptions of inequitable distri-
bution of assistance. Respondents were asked about community unity
after the tsunami (with a score of 1 if it had strengthened, 0.5 if it was
unchanged, and 0 if it had deteriorated). An average group score below 0.5
would suggest, therefore, community cohesion had deteriorated after the
tsunami. In fact, the group average was less than 0.5 in all cases indicating
a widespread view – though the extent differed between groups – that com-
munity cohesion had deteriorated after the tsunami.
An Ordered Probit regression was used to explore the relationship
between mental health and a number of likely explanatory variables.

Thailand 207
The index (MENTAL) was constructed as described earlier. This index

was regressed on the percentage of total assets destroyed by the tsunami
(LOSSASSET), expectations of a future tsunami (EXPTSUNAMI),
interactions with other victims who attempted to commit suicide
(SUICIDE), age (AGE), the number of family members lost in the dis-
aster (LOSSFAMILY), consultation or visits provided by health officials
(CONSULT), and perception of community unity (UNITY).
The results (Equation (6A.2) in Appendix 6A.1) suggested that eco-
nomic loss was a key factor significantly affecting mental health. This
finding was consistent with results reported by van Griensven et al. (2006),
who found that the loss of livelihood was independently and significantly
associated with symptoms of all three mental health outcomes (PTSD,
anxiety, and depression). Loss of family members and expectations of
future tsunamis, too, adversely affected mental health. On the other hand,
a perception that community unity had been strengthened helped reduce
mental distress, as did visits or consultations by health officials. Age and
knowing someone who had attempted suicide were not significant. These
results have obvious policy implications. They highlight the importance
of adequate and equitable financial assistance, and the value of visits by
health officers to provide counselling and advice.
The Tsunami and Tourist Attitudes
Given the importance of tourism to the regional economy, responses

obtained in the survey from a small sample (37) of tourists visiting the
three provinces were analysed. The aim was to explore their views and
gain insights into ways in which the tourism industry could recover rapidly
(Table 6.19). The sample was evenly distributed between new visitors and
previous visitors who had returned to the tsunami-affected beaches.
Views expressed by tourists provided grounds for optimism about the
recovery of the Thai tourist industry. Some two-thirds of the respondents
did not expect another tsunami to hit the area within the next few years.
And importantly, they all agreed that the early warning system installed
by the government could improve levels of safety. Despite the fact that 22
per cent of the tourists surveyed had known someone who had died in the
tsunami, these visitors had nevertheless opted to return to the Andaman
area. During the first quarter of 2005, unlike western visitors, Asian visi-
tors reportedly tended to stay away from the affected areas because they
felt uneasy about tsunami ghosts. In our sample, more than 80 per cent
of the visitors said that they were not afraid of tsunami ghosts. A slight
majority (57 per cent) agreed that the media had discouraged tourists, and
two-thirds of visitors still saw some traces of the tsunami’s destruction.

Table 6.19 Interviews with tourists
Yes (%) No (%)

Have you been to Andaman before? 49 51
Do you think that the media has scared visitors away? 57 43
Are you scared of tsunami ghosts? 19 81
Do you think that the next tsunami will hit again within 32 68
the next few years?
Do you think that our early warning system can 100 0
improve safety?
Do you still recognize any traces of tsunami destruction 65 35
in this area?
Did you know anyone who lost their lives here? 22 78
June 2006.
Respondents were asked to rate the rehabilitation performance of the

Thai government in three areas: infrastructure reconstruction, environ-
ment restoration, and assistance given to tsunami victims. The overall
rating on a scale of 1 to 5 across all three areas was relatively similar and
satisfactory: 3.32 (66 per cent) for infrastructure rehabilitation, 3.38 (68
per cent) for environment restoration, and 3.68 (74 per cent) for victim
assistance.
In addition, a hypothetical question was included in the survey to gauge
the impact of a tsunami in terms of visitor perceptions of safety (‘fear’):
how many months would it take the respondents to return to the areas
if another tsunami were to strike in the future? If visitors had no fear,
it can be presumed they would return without hesitation if they had the
opportunity. But some visitors may have been deterred from a return visit
by several factors – such as the fear of another tsunami; the grim picture
painted by the media; a poor reconstruction effort by the government;
or perhaps fear of tsunami spirits and ghosts. While recognizing that the
sample included only visitors who had already returned and was therefore
biased, a multiple regression model was used to get some indication of the
extent to which these factors may influence tourists to delay returning to
the region, taking the measure of ‘fear’ as a proxy.
The results suggested that grim pictures presented by the media were
likely to have a significant deterrent effect, interacting with the perception
of tourists about the rebuilding effort of the government (see the detailed
results in Equation (6A.3) in Appendix 6A.1). The fear of tsunami ghosts,
interacting with the number of previous visits, was the most significant

Thailand 209
variable in the equation. This variable was more important than other
variables representing expectations of a future tsunami and the positive
effects of successful government efforts in rebuilding.
Even if tourists did return, a critical issue for the Thai tourist industry
was the duration of stay. Another regression was used (using the number
of days visitors would stay in the area as the dependent variable), hypothe-
sized to test the fear factor, the media scare variable, and an Asian dummy
variable, given that Asian visitors tend to have different behavioural
characteristics to other visitors. The results (Equation (6A.4) in Appendix
6A.1) suggest that, as expected, fear reduced the expected duration of
stay. Further, media scare was particularly important as a negative factor
for Asian tourists. This finding – if confirmed by other studies of a more
representative sample – would indicate that efforts to promote tourism
through discount holiday packages and marketing promotions may not
work well for Asian markets. On the other hand, favourable media cover-
age, highlighting the successful rehabilitation of the areas and the tourism
industry overall, may have been expected to have a more positive impact
on Asian tourism.
ASSISTANCE ASSESSMENT
Quality, Level, and Effectiveness of Assistance
A major aim of the field survey was to obtain the views of the tsunami
victims on the impact of the aid program for relief, reconstruction and
recovery. Respondents were asked to evaluate the assistance from various
organizations on a scale of 1 to 4.18
The survey results indicated that respondents in all categories received
assistance from government, foundations, and private corporations. In
many cases, the role of government assistance was complementary to cor-
porations and charity foundations. The government and other organiza-
tions sometimes pooled their resources to provide, for example, housing
for families whose houses had been destroyed. Similarly, private corpora-
tions contributed to financing housing construction done by army units.
None of the survey respondents reported any systematic bias in the provi-
sion of government assistance.
However, the overall level of satisfaction was not very high (Figure
6.7). Still, this response must be treated with some caution. It is possible
that respondents may have rated the overall assistance not very highly
in hope of getting more aid in future. Moreover, there was substantial
variation among the groups in their assessments of the various donor

2.5
2.0
1.5
1.0
0.5
0.0
H F E L B M
Government Foundation Private sector

M: Moken minority.
Figure 6.7 Comparative evaluation of donors
agencies. While Diversified Households, Entrepreneurs, Labourers, and

Beach Vendors ranked assistance from the government equal to, or higher
than the assistance from the private sector and foundations, Fishers and
Moken people rated assistance from foundations and private corporations
as superior.
A series of questions was asked about cash needs, the amount received,
the speed of disbursement, and adequacy (Figure 6.8). Again, the responses
have to be treated with caution because respondents are likely to have felt
that their answers might affect the amount that they would get in the
future so they may have tended to overestimate their need for cash aid
while underestimating the amount they had received.
Respondents rated the amount of cash grants they had received on
the following scale: 0 for no grant, 1 for little, 2 for moderate, 3 for large
(high), and 4 for very high. In addition, they were asked to rate their need
for future cash grants on the same scale. While there were differences
between the categories, the overall responses indicated that what they had
received was low to moderate, and that low to moderate levels of cash
assistance were still needed.
As for the speed of cash disbursement, respondents who did not get
any cash were assigned a score of 0, 1 if arrangements took more than a
month, 2 if two weeks, 3 if within one week, and 4 if cash was provided
immediately. Most people got cash aid within a month. The average rating
for speed of cash delivery was 1.5, implying that cash aid, on average, was
received within about three weeks of the tsunami, but in the case of some

Thailand 211
2.5
1.5
0.5
0
H F E L B M
More cash needed Cash received Speed Sufficiency

M: Moken minority.
Figure 6.8 Cash grants: sufficiency and speed
groups it was faster (one to two weeks) – including Fishers and Moken
people – but for others, including Beach Vendors and Labourer house-
holds, it was closer to a month.
As to the question whether they received a sufficient amount of cash
aid, if the respondent answered no, the score given was 0, and if yes, the
score given was 1. (Note the difference in the scale for this question when
interpreting the height of the column in Figure 6.8.) The score for this
sufficiency question was very low, ranging from 0.08 (Labourers) to 0.19
(Moken). Again, these scores may have been highly influenced by the per-
ception that responses might influence future assistance levels.
As mentioned earlier, the provision of job training was another aspect
of assistance. According to the survey responses, assistance with job train-
ing was provided at a relatively late stage – about seven to twelve months
after the tsunami.
In Figure 6.9 the survey responses across groups to questions on
areas of need for future assistance are shown. Respondents ranked each
category of demand on a scale of 0 to 4. Leaving aside the question
on business assistance, which was only directed to respondents in the
Entrepreneur group, the type of assistance that respondents ranked as
being most important was cash grants, followed by job training, housing,
and health care.19

1.5
0.5
0
le
ta ess
h
ng
g
f
ie
r
as
sin
io
tit
ca
ni
el
e
sis in
at
C
nc
ou
tr
nd
ai
lth
as Bus
uc
tr
eb
H
La
ea
ed
b
H
Jo
ld
hi
C
Figure 6.9 Areas where future assistance is needed
Build Back Better
In all the main tsunami-affected countries reconstruction activities have

been conducted under the slogan ‘build back better’. The basic idea was
that new construction would not simply replace what existed previously
but would be superior in quality. Community perceptions of the effective-
ness of this approach were investigated by focusing on a key component
of the reconstruction effort: the reconstruction of damaged or destroyed
houses. Respondents who had received housing assistance were asked to
indicate whether the quality of their newly constructed house was better
than their old house.
There were reports both in Thailand and in other tsunami-affected
countries of many instances where communities were not happy with their
new houses. It is admittedly not easy to interpret these reports. People
traumatized by the experience of a disaster might react to new homes in
different ways. In a depressed state, they might view a new house as being
an inferior replacement to their old dwelling even if the new house was in
fact a superior structure. Alternatively, they might rate it as better because
they had lowered their expectations due to reduced circumstances of
unemployment, debt, and so on.
This matter was investigated using a model with a dummy dependent
variable, Build Back Better (BBB), which was assigned the value of 1 if

Thailand 213
the new house was perceived as a better house than the old one and 0 if
otherwise (see Equation (6A.5) in Appendix 6A.1). The probit regression
results suggest that the economic circumstances of households may indeed
have been related to how they viewed their new houses. Households which
suffered serious economic losses, or had experienced a long period of unem-
ployment, or were in pressing need of more cash assistance (a proxy for being
liquidity-constrained) were more likely to rate their new house as better.
Psychological factors (mental distress and loss of family members)
ranked lower in the model than economic factors.20 While the results
are not conclusive, it does appear that those who lost almost everything
tended to appreciate the value of their new houses while those who did
not lose much had higher expectations of the quality of the houses offered
to them. Those who suffered relatively smaller losses tended to deny the
notion of build back better.
Role of NGOs
Information from the perspectives of the NGOs was obtained in inter-

views with NGO representatives.
NGOs were involved in a range of assistance activities in Thailand.
Some of them provided livelihood equipment and job training, initiated
health consciousness campaigns, and set up organic farms and child care
centres. They also provided education-related assistance such as providing
English teaching, giving student scholarships to tsunami-affected children,
and building community libraries.
But there were problems. Many of the NGOs interviewed reported that
gaining cooperation from villagers was sometimes a problem. There was
sometimes a perception in the communities that the NGOs would only be
active for a short period and thus could not be relied on for longer-term
assistance.21 This made people reluctant to contribute to or participate in
NGO programs. Some NGOs admitted that lack of coordination between
them has produced overlap, leading to inequitable and inefficient delivery
of assistance. The result has been to produce a sense of unfair treatment
among recipients and to contribute to a deterioration of social cohesion
among villagers.
However the story was complicated because there was another side to
it. Many NGOs encountered avaricious aid recipients who resorted to
deception with fake claims of damages and injury – sometimes even using
corpses that belonged to other families – to claim compensation and assist-
ance. With assistance focused on material and cash handouts, some chil-
dren were reportedly disappointed that they were not orphaned because
they received less assistance from the NGOs.

Aid Dependency?
In the literature on aid, a frequently expressed concern is that aid recipi-

ents can develop an ‘aid dependency’ attitude that constrains them from
taking private initiatives to move beyond aid recipient status. While
eighteen months after the tsunami may be a relatively short period to
assess attitudes on this matter, a preliminary analysis of survey responses
was conducted to see if any sign of such a syndrome was apparent. Some
indications of the existence of an ‘aid dependency’ syndrome may be
considered to be present if people who had received substantial assistance
continued to rate their assistance needs as high (even though they should
have had lower assistance needs). When respondents were asked if they
still needed additional cash aid in 2007, those who suffered greatly from
asset destruction and income reduction were more likely to reply ‘yes’. But
those who had received a new house and a secured land title were surely
unlikely to have really required more cash and should have needed to
depend less on financial aid. We explored whether these types of proposi-
tions were supported by the survey responses.
An index (in log values) was constructed to measure the degree of cash
dependency. The ratio of desired cash in 2007 was compared to the cash
aid that respondents had received in 2006. If value of the ratio of need for
cash (NMCASH) to the cash received (RECASH) was negative, house-
holds’ expressed need for cash aid was considered lower. If the value was
positive, the expressed need was considered higher, suggesting a tendency
towards growing aid dependency. As seen in Figure 6.10, the kernel
density distribution was tilted to the positive region indicating that there
was indeed evidence supporting the aid dependency view. However, this
matter needs further analysis to examine why respondents continued to
ask for cash aid.
This was tested further undertaking a multivariate analysis. A depend-
ent variable MORECASH was defined as the difference between cash
‘needed’ in 2007 and the sufficiency of cash previously received.22
The results (Equation (6A.6) in Appendix 6A.1) show that those who
believed they had received adequate cash (SUFCASH) tended not to
express a need for more financial assistance. Also, it is interesting to note
that those who had borrowed tend not to seek more money. A possible
explanation is that the fact that they had borrowed indicates that they
had access to credit markets and hence were not highly credit-constrained
and did not seek more handouts from donors. Looking at variables that
are statistically significant and positive, only people who lost their liveli-
hoods through mental depression and suffered a large income loss after the
tsunami appear likely to have continued to demand more cash aid.

Thailand 215
Kernel Density (Epanechnikov, h = 0.3165)

1.0
0.8
0.6
0.4
0.2
0.0
–1.0 –0.5 0.0 0.5 1.0
log (NMCASH/RECASH)
Figure 6.10 Distribution of demand for aid with respect to aid received
In sum, weighing these factors up, there is no strong evidence to support

the aid-dependency view. The finding that those who were able to adjust
through borrowing tended not to ask for continuing handouts is signifi-
cant. The indications are that once difficulties in the immediate aftermath
of the disaster were overcome, tsunami victims were not likely to become
aid dependent provided they had access to credit markets. In addition,
employment-generating programs – which would enhance their capacity
to both borrow and repay – were likely to give tsunami victims a better
chance to lead normal lives without having to depend on long-term aid.
Other Impacts of Assistance
Several other aspects related to aid and assistance have not been explored.
There were concerns, for example, that the cultural heritage of the minor-
ity Moken people might be lost due to the provision of large amounts of
assistance which some feared might erode their traditional way of life.
Moken children, some argued, no longer cared about their language and
culture, and money and material belongings had become the dominant
objectives in their lives. They blamed this on the fact that their rebuilt

community was located near the road linked to city areas. Donors cer-
tainly need to be sensitive to such unintended impacts of large-scale assist-
ance and reconstruction activities.
CONCLUSION
This chapter has discussed the responses to the December 2004 tsunami
disaster in Thailand. In 2006, two years after the tragedy, the human
dimensions of the disaster were still acute but it was clear that Thailand
had made major steps towards recovering from the worst economic
effects.
There is a consensus that the initial relief effort was satisfactory given the
unpredicted nature of the disaster and the further complications created
by having a very large number of foreign tourists among the victims. The
huge international media coverage of the tsunami led to an outpouring
of offers of assistance from governments and communities around the
world. Thailand, however, refused to solicit official financial assistance
for the recovery and reconstruction phase, preferring to rely on domestic
sources and organizations. The domestic community and corporate sector
response was very positive leading some analysts to argue that the decision
to rely on domestic finances probably ensured a stronger overall response
than would otherwise have been the case.
The largest economic impact was on the tourism industry followed by
the impact on the fisheries sector in southern Thailand. In contrast to the
situation in Indonesia and Sri Lanka, economic losses were not primarily
caused by damage to physical assets and infrastructure but by losses from
forgone earnings in the tourism sector. In the tourism industry, the tsunami
did not completely destroy all hotels and other facilities even in affected
regions. However large losses were caused by the sharp fall in tourist arriv-
als. The immediate impact on the regional economy was severe. But the
overall effects of the tsunami on the wider national economy – even in the
short term – were muted by the fact that there were alternative destina-
tions available for tourists within Thailand. Overall, initial estimates of the
negative impact on the economy were quickly revised. Indeed, in the two
years following the tsunami there was a general recovery in tourist arrivals
in Thailand even though many Asian tourists were somewhat reluctant to
return.
The relief and subsequent reconstruction efforts were facilitated by
the relative proximity of the affected areas to the Bangkok metropoli-
tan region. Relatively easy access to the region meant that emergency
assistance could be provided quickly. The availability of a large pool of

Thailand 217
construction labour and materials allowed reconstruction activities to be

undertaken without major supply-side constraints. In particular, with a
construction sector that had yet to recover fully from depressed demand
in the wider economy, the demand generated by reconstruction efforts in
the tsunami-affected region did not produce the kinds of cost increases
seen elsewhere. In other words, reconstruction efforts in Thailand were
not affected by cost increases associated with Dutch Disease effects of a
construction boom seen, for example, in Indonesia.
Though the immediate response to the disaster within the first few weeks
of the tsunami can be considered a success, poor coordination among aid
donors, NGOs, and aid recipients hampered effective delivery, and some-
times led to inequities and waste in aid distribution. Some job training pro-
grams did not lead to employment because they did not provide skills that
were in demand in regional labour markets. In any case, the fact that the
disaster was seen as a temporary (one-off) shock meant that most people
were not interested in undertaking costly training for a new occupation.
The assistance they sought in the short term was primarily for financial
assistance (cash) or for access to credit markets so that they could cope
with the immediate problems caused by loss of incomes and livelihoods.
In the longer term, they primarily sought aid to restore their damaged or
destroyed assets.
The overall reconstruction effort, despite some of these limitations, was
seen by most people in Thailand as reasonably successful. However, the
experience of the post-tsunami reconstruction effort suggests that greater
direct cash aid, improved access to credit markets (including microfinance),
and better coordination among aid agencies is needed. The provision of
these kinds of assistance can also address concerns about aid dependency.
The survey reported on in this chapter did not find any evidence that aid
dependency was a problem in Thailand following the Asian tsunami. Most
people who continued to ask for aid did so because they genuinely needed
financial assistance. Most of these people had lost their livelihoods, were
unemployed, or had little or no access to credit markets.
Many of the inefficiencies in aid programs reflected the problems of
supply-driven assistance. Beyond the immediate emergency relief stage
where food, medicine, clothing and basic shelter were priorities, direct
cash assistance would have allowed most households to obtain what they
required from nearby markets. While supply-oriented assistance cannot be
avoided during the immediate response phase because donating agencies
and corporations are most efficient in utilizing their core competencies, the
reconstruction experience highlighted the need to adopt a more demand-
oriented, participatory approach during the period of rehabilitation and
reconstruction. More participatory approaches are needed so that aid can

be effectively channelled into areas of greatest need in cooperation with

local communities.23
Broader issues have been raised about the need for greater preparedness to
face natural disasters. These include establishment of early warning systems,
development of greater community awareness about natural disasters and
how to prepare for them, and use of market instruments on the part of the
private sector and households to insure against damages from such disasters.
Subsidized insurance policies covering catastrophic losses, through provid-
ing tax incentives to market participants, can encourage the development
of disaster insurance markets and induce private firms to get involved. This
public subsidy would be less costly than supporting post-disaster relief pro-
grams. Some progress has already been made with early warning systems.
However, the relative infrequency of megadisasters may mean that in the
absence of any similar huge disaster in the near future, community recogni-
tion of the need to prepare for future disasters may not be sustained.
There are also broader lessons for the international community. The
Thai government did not seek financial assistance from the international
community; indeed it encouraged international donors to direct their
assistance to countries such as Indonesia and Sri Lanka which suffered
more than Thailand and which were less able to generate the financial
resources needed for reconstruction. However Thailand did ask for a dif-
ferent form of assistance from developed countries: it requested the lifting
of barriers that prevented access to donor markets for Thailand’s exports.
Thailand argued that the removal of tariff and non-tariff barriers is the
best kind of assistance developed countries can give to developing coun-
tries hit by disasters. Such market access would give developing countries
a chance to achieve sustainable recovery. Regrettably, this request was
largely ignored, despite the oft-repeated rhetoric of many foreign govern-
ments that trade is better than aid as a form of development assistance.
NOTES
1. Bhanupong Nidhiprabha was primarily responsible for this chapter which draws on
Nidhiprabha (2007).
2. See Telford et al. (2006).
3. United Nations and World Bank (2005): p. 19.
4. Telford et al. (2006).
5. By December 2006, the last 440 unidentified bodies, believed to be migrant workers
from Myanmar, had been buried in the cemetery for unidentified tsunami victims in
Kao Lak. Their DNA samples had been collected for possible future identification.
6. Phang Nga suffered most in terms of destroyed hotels. Although the number of hotels
in Krabi did not fall much, the number of rooms in operation was reduced by almost 12
per cent because some large hotels were badly affected.

Thailand 219
7. JP Morgan thus underestimated the first quarter growth, while both JP Morgan and
Morgan Stanley overestimated the annual growth rate.
8. This led the World Bank in November 2005 to reduce its growth forecast from 5.2 to
4.2 per cent, and the Asian Development Bank, also highlighting the role of tourism,
warned that the current account deficit in 2005 would worsen further if tourist arrival
numbers did not recover during the peak season in the last quarter of 2005 (ADB
2005).
9. Note that some of these expenses may be subsequently recoverable in the form of paid-
back principal and investment returns. In addition, these measures may yield subse-
quent tax revenues as they indirectly generate employment.
10. See Nazara and Resosudarmo (2007) and Jayasuriya et al. (2006).
11. Ironically, the SME Bank had the highest rate of non-performing other loans among
financial institutions in Thailand – at 35 per cent of total outstanding loans amounting
to 16 billion baht in 2006.
12. The NDWC paid six million baht to the Navy to install the buoy and patrol the area to
prevent approaching vessels from getting too close to the beacon.
13. Bernhard et al. (2005) have argued that the Thai government’s rejection of official
aid from other countries may have encouraged corporate donors to make a larger
contribution.
14. There are a number of microfinance organizations operating in Thailand, including the
Small Enterprise Development Corporation, which serves 15 000 clients in the north-
east region of Thailand. Coleman (2006) found that microcredit may not reach the core
poor of northeast Thailand because wealthier villagers participate more than the poor
and become committee members who borrow significantly more than rank and file
members.
15. There were significantly more male respondents than females in the Fisher and
Labourer categories (81 per cent and 58 per cent, respectively) while there were more
females within the Entrepreneur (64 per cent) and the Moken categories (56 per cent).
In other categories (Diversified Households and Beach Vendors) the gender numbers
were approximately equal.
16. People were apparently likely to move into areas where they did not have comparative
advantage if they changed occupations.
17. The index was constructed on the following basis. If a person able to carry on with
their normal way of life as if nothing had happened, a score of 0 was given. If a person
accepted their misfortune, but acted with resolve and coped well with the crisis, a score
of 100 was given. The score was raised to 200 if they were still in a state of acute sadness;
to 300 if they suffered from hallucinations; and to 400 if they were paranoid. All scores
were assigned by enumerators after interviews with respondents.
18. Scores used were 0 when there was no help at all, 1 for a low level of assistance, 2 for
medium assistance, 3 for high assistance and 4 for the highest level of help.
19. The F-tests of means and variances indicate statistical differences at a 0.01 level of
significance.
20. It must be recognized that there is a co-linearity problem between the number of family
members lost and mental health deterioration, which may lead to the coefficient of psy-
chological factors becoming statistically non-significant.
21. More than 70 per cent of the NGOs interviewed were not planning to stay in the areas
longer than three years.
22. A Tobit model was used because respondents are likely to overstate their amount of
cash aid needed, hoping to receive more cash, and are likely to understate the amount
of aid they received. Hence we used a censored model with extreme values, 23 and 3,
resulting in three observations left censored and ten observations right censored.
23. The pattern of financial assistance provided to tsunami victims has set the standard
for mitigating the impact of other natural disasters. Thailand is prone to frequent
floods and droughts. In early 2006, the victims of flash floods and mudslides were given
US$600 000 from a contingent budget earmarked for natural disaster relief.

REFERENCES
ADB (Asian Development Bank) (2005), ‘An initial assessment of the impact of
the earthquake and tsunami of December 26, 2004 on South and Southeast
Asia’, online Note, January.
Bernhard, Richard, Y. Yritsilpe and O. Petchkul (2005), ‘Corporate philanthropy
in Thailand’, in Philanthropy in Disasters: Tsunami and After, Conference
Proceedings of the Asian Pacific Philanthropy Consortium, Kenan Institute,
Phuket, 28–30 November.
Coleman, Brett E. (2006), ‘Microfinance in Northeast Thailand: who benefits and
how much?’, World Development, 34 (9),1612–38.
Counts, Alex, L. Collins, G. Octavio and V. Rai (2005), Recovery from the Tsunami
Disaster: Poverty Reduction and Sustainable Development through Microfinance,
Special Report, 26 May, USA: Grameen Foundation.
FAO (2005), Tsunami Impact on Fisheries and Aquaculture in Thailand, Joint
Report of the NACA, FAO, SEAFDEC and BOBP-IGO, 14 January.
Issues and Challenges in Sri Lanka, ADB Institute Research Paper 71, January.
Kunreuther, Howard and M. Pauly (2006), Rules Rather than Discretion: Lessons
from Hurricane Katrina, NBER Working Paper 12503, August.
Rehabilitation: Progress and Challenges at the End of 2006, ADBI Discussion
Paper 70, http://www.adbi.org/files/dp70.acehnias.reconstruction.rehabilita
tion.pdf, accessed 31 October 2009.
Nidhiprabha, Bhanupong (2007), Adjustment and Recovery in Thailand Two Years
after the Tsunami, ADBI Discussion Paper 72, http://www.adbi.org/files/dp72.
thailand.tsunami.adjustment.recovery.pdf, accessed 31 October 2009.
United Nations and World Bank (2005), Tsunami Thailand, One Year Later – National
Response and the Contribution of International Partners, http://www.reliefweb.
int/rwarchive/rwb.nsf/db900sid/RMOI-6KF8KS?OpenDocument&Click=,
accessed 31 October 2009.
van Griensven, Frits, M.L. Somchai Chakkraband, W. Thienkrua, W. Pengjuntr,
B. Lopes Cardozo, P. Tantipiwatanaskul, P.A. Mock, S. Ekassawin, A.
Varangrat, C. Gotway, M. Sabin and J.W. Tappero (2006), ‘Mental health
problems among adults in tsunami-affected areas in Southern Thailand’, Journal
of American Medical Association, 296 (5), 537–48.
World Conference on Disaster Reduction (WCDR) (2006), Thailand Country
Report 2006, WCDR.

Thailand 221
APPENDIX 6A.1
(1) Demand for Credit (CREDIT)
Method: Least Squares, 85 observations

White Heteroskedasticity-Consistent Standard Errors & Covariance
CREDIT 5 1.845 2 0.002 INTEREST 1 0.507 LOG (TOTAL-AID)

(1.070) (21.967)** (3.332)*** (6A.1)
1 0.507 BUSINESS-LOAN 1 0.771 COLLATERAL
(1.750)* (2.996)**
1 0.245 LOG(YB*UNEMPLOY)
(2.082)***
Adjusted R-squared: 0.255

F-statistic: 6.755
Prob (F-statistic) 0.000
(2) Mental Health Problems (MENTAL)
Method: ML – Ordered Probit (Quadratic hill climbing), 252 observations

Number of ordered indicator values: 5
MENTAL 5 0.366 EXPTSUNAMI 1 0.286 SUICIDE

(2.122) *** (1.550) (6A.2)
1 0.016 LOSSASSET 2 0.005 CONSULT*LOSSASSET
1 (4.171)*** (22.260)***
2 0.334 UNITY 1 0.281 LOSSFAMILY 1 0.006 AGE
1 (22.083) *** (1.857) * (1.217)
LR statistic (7 df) 40.0442

LR index (Pseudo-R2) 0.063
Probability (LR stat) 1.23E-06

(3) Tourist Attitude (FEAR)
FEAR 5 5.853 2 4.953 MEDIASCARE*REBUILDING

(3.340) (22.596)*** (6A.3)
1 2.460 EXPTSUNAMI 1 16.14 GHOST*VISIT
1 (1.040) (7.005)***
Adjusted R-squared 0.321

F-statistic 6.697
Prob(F-statistic) 0.0011
(4) Stay Length (STAY-LENGTH)

White Heteroskedasticity-Consistent Standard Errors & Covariance
STAY-LENGTH 5 18.68 2 0.472 FEAR 2 10.86 MEDIASCARE*ASIAN

(5.030) (22.209)*** (23.227)*** (6A.4)

S.E. of regression 10.559
F-statistic 5.551
Prob (F-statistic) 0.008
(5) Build Back Better (BBB)
Method: ML – Binary Probit (Quadratic hill climbing)

Sample: 146, 58 observations with B50, 88 observations with B51
QML (Huber/White) standard errors & covariance
BBB 5 5.998 2 1.253LOG(LOSSASSET) 1 0.205 NMCASH

(2.638) (22.359)*** (1.749)* (6A.5)
2 0.159 LOSSFAMILY 2 3.18E-06 DEBT 2 0.102 MENTAL
(20.668) (21.731)* (21.281)
2 0.047 UNEMPLOY
(22.357)***

Thailand 223
Z-statistics in parentheses
LR statistic (6 df) 22.159
McFadden R-squared 0.112
Probability(LR stat) 0.0011
(6) Aid Dependency (MORECASH)
Method: ML – Censored Normal (TOBIT) (Quadratic hill climbing), 252

observations
MORECASH 5 0.346 2 8.05E-07 DEB 1 8.52E-07 UNEMPLOY*YB

(3.312) (22.542)*** (3.172)*** (6A.6)
1 0.132 MENTAL 2 0.763 SUFCASH
(2.508)*** (23.380)***

S.E. of regression 1.098
***, **, and * significant at the 1, 5, and 10 per cent level, respectively.
Definition of Variables
AGE Age of respondents

ASIAN Dummy variable 5 1 if Asian visitor, 0 otherwise
BBB Dummy variable for build back better house, 1 if
better, 0 otherwise
BUSINESS-LOAN Dummy variable for loan purpose, business 5 1, 0
other purpose
CONSULT Dummy variable 5 1 if received consultation or
visits by health officials, 0 otherwise
COLLATERAL Dummy variable for loan collateral requirement 1 if
required, 0 otherwise
CREDIT Amount of borrowing
DEBT Amount of debt incurred after the tsunami
EXPTSUNAMI Dummy variable 5 1, if respondent expects another
tsunami within a few years, 0 otherwise
FEAR A proxy for fear of tsunami (number of months
required before returning to the area where the
tsunami struck)
GHOST Dummy variable 5 1 if respondent is afraid of
tsunami ghosts and spirits, 0 otherwise

INTEREST Interest rate on loan

LOSSASSET Percentage of destroyed assets
LOSSFAMILY Number of family members lost
MEDIASCARE Dummy variable 5 1 if respondent agreed that
media has scared visitors away, 0 otherwise
MENTAL Index of mental health: normal 5 0, resolve51, sad
5 2, hallucination 5 3, paranoid 5 4
MORECASH Difference between need for more cash aid
(NMCASH) and sufficiency of cash aid previously
received (SUFCASH)
NMCASH Liquidity constraint expressed by degree of need for
cash
REBUILDING Dummy variable for visitors’ perception of the
rebuilding in the area: 1 if there are traces of physi-
cal damage, 0 otherwise
SUICIDE Dummy variable 5 1 if knowing other victims who
had attempted to commit suicide, 0 otherwise
SUFCASH Sufficiency of cash aid previously received
STAY-LENGTH Number of days visitors would prefer to stay
TOTAL-AID Total amount of financial aid
UNEMPLOY Number of months being unemployed after the
tsunami
UNITY Variable representing the perception of changes
in community unity: 1 if strengthened, 0.5 if
unchanged, 0 if deteriorated
VISIT Number of previous visits in the Andaman area
YB Pre-tsunami monthly income.

7. Conclusion
INTRODUCTION
In the wake of a great disaster it is natural to look for hope. We can, we
think, at least draw lessons which will help guide us in the future. We can
do better next time, we tell ourselves. We hope that the pain that vast
numbers of people have suffered will not be in vain. This chapter will
consider how realistic such hopes may be in the light of the 2004 Asian
tsunami events and consider what lessons may be drawn from the experi-
ence of the delivery of aid following the tsunami.
But for those who read these pages hoping for guidelines that can ensure
considerable improvements in the delivery of disaster aid in development
countries, a warning is in order. One of the main lessons of the delivery
of assistance following the 2004 Asian tsunami is that much confusion
and conflict is inevitable in the immediate aftermath of such situations.
Local emergency institutions in poor countries are almost always greatly
over-stretched in crises of this kind. The international community rarely
responds much better either. Indeed, our single most important conclusion
is that it is local communities – rather than the national or international
communities – who are quickest to provide the most valuable practical
immediate assistance following a great disaster. The policy implication is
that within the extremely limited funding available to support emergency
relief measures in poor countries, much greater priority needs to be given
to strengthening local preparedness rather than funding delayed responses
in the aftermath of the event.
It is worth pausing to consider this view. Other approaches need to
be considered. One alternative view outlined in the United Nations’ first
biennial global assessment of disaster risk reduction issued in 2009 is that
the emphasis of policy should be on disaster risk reduction (ISDR 2009).
According to this view, the emphasis should be less on preparedness and
more on action at an even earlier stage with the aim of reducing the risks
of disaster and with the ultimate aim of minimizing the risk that a disaster
will strike at all. Another view, implicit in the current approach of the
international community, is that it is post-disaster responses which are
important. According to this view – which embodies a reactive approach
225

to disasters in poor countries – donors should essentially stand ready to

respond with various forms of assistance after a disaster has occurred.
Certainly these views need careful consideration. But one of the most
important conclusions set out in this chapter is that it is to local prepared-
ness that governments in developing countries and international donor
agencies alike should give more attention. And there are other key lessons
as well. In considering these other lessons it will be useful to consider, first,
the stages of the initial response to the tsunami disaster, then coordina-
tion issues, and third, aid delivery, before finally setting out some main
conclusions. A main theme will be that coordination of the relief effort was
difficult at every stage and that international donors, especially, need to
consider how they might do things better when future megadisasters strike
in developing countries.
STAGES OF RESPONSE
Numerous reviews of the overall response to the tsunami disaster noted

that the process of providing assistance passed through distinct phases.
The sequencing diagram shown as Figure 4.4 in Chapter 4 (Nazara and
Resosudarmo) has been widely referred to as a useful schema which illus-
trates, in broad terms, how the overall response evolved over time. What
the sequencing diagram does not illustrate, however, are the different con-
tributions that the various communities and levels of government made at
different stages during and following the disaster.
Local Responses
Because the fact is so important, it needs to be appreciated that the first,

immediate response to the disaster, almost everywhere, was at the local
level. In most places devastated by the tsunami, outside help did not start
arriving for at least 24 hours. Indeed, in several places little significant
outside help arrived for four or five days – and this, in fits and starts, in an
uncoordinated way, as disaster relief systems at the national level began
to comprehend the scope of the emergency (Kilby 2007: 124). Numerous
community groups and local enterprises in the informal economy, largely
out of sight of national agencies and generally invisible to the international
community, swung into action immediately. As a Tsunami Global Lessons
Learned Project report noted (TGLL 2009: 49): ‘The unsung heroes were
thousands of small merchants, hoteliers and enterprises situated away
from the coast, with the assets, equipment and initiative to commit all to
the humanitarian crisis long before outside help was at hand.’

Conclusion 227
This fact – that the fastest provision of first aid tends to be from the local
level – is of central importance in considering future strategies for disaster
response in poor countries. The phenomenon has been noted in the case of
other disasters in developing countries as well. In India and Pakistan, for
example, in October 2005, when a megadisaster caused by an earthquake
killed around 75 000 people, it was observed that (Brennan and Waldman
2006: 1769–70):
International urban search-and-rescue teams arrived within days, but their

heroic efforts probably saved relatively few lives: such interventions are gener-
ally responsible for only a small part of the public health effort of relief efforts
since most survivors are rescued by community members in the first hours or
days.
Some of the main implications of this phenomenon, implications which

surely need to be considered more carefully by international donor organi-
zations, are taken up below.
National Response
The second set of early responses to the tsunami arrived from the national
level. In Sri Lanka and Thailand, accurate details of the local situation
began to arrive in the capital faster than was the case in Indonesia. In
Indonesia, the terrible news from the distant provincial capital of Banda
Aceh trickled into Jakarta only slowly. Key telecommunication and road
systems had been severed by the tsunami in Aceh so there was a good deal
of confusion at first. In all of the affected countries, it took some days for
the under-resourced national emergency systems to comprehend fully the
scope of the disaster.
International Responses
International responses to disasters in poor countries usually take some

time to arrive. So it was with the provision of international assistance for
the Asian tsunami. There are several factors which often lead to significant
delays in the response.
For one thing, it often takes time for news to filter out into the western
media from remote places in poor countries. And when the Asian tsunami
struck, the western media tended to focus on stories about the plight of
westerners caught up in the tsunami (Kivikuru 2006). This meant that
popular tourist locations in Thailand and Sri Lanka received extensive
coverage early on while news from barely known places such as Banda
Aceh tended to receive less attention. As one of the main Tsunami

Evaluation Coalition reports (Cosgrave 2005: 6) observed ‘Less than 1

percent of those who died were tourists, but these got most of the media
attention in donor countries. One study found that 40 percent of western
media coverage on people affected by the disaster dealt with tourists.’ So
the news of the total numbers of dead – and the real scale of the disaster –
took time to seep out to western countries where the local media was still
caught up in the joyous mood of Christmas rather than focusing on the
harsh realities of disasters in distant poor countries. The reaction of many
in the Asian region was reflected in the dismay of one Indonesian who
recalled that (Tuli: 2007):
I remember my disbelief when international media attention remained focused

on those islands where Western tourists had died. It was like saying locals didn’t
suffer as much because the colour of their skin wasn’t white. Does a darker skin
preclude one from feeling pain? Are our dreams and hopes and wishes any less
important?
The harsh but honest answer is that for western media agencies reporting
from disaster sites, the dreams and hopes and wishes of local people in
far-flung places like Aceh and Sri Lanka are indeed less important than
the plight of western tourists. Western media firms are commercial organi-
zations. They see their main business as that of providing consumers in
rich countries with interesting news, not to provide a voice to people from
developing countries.
For another, when news of a disaster arrives it takes time for donor
agencies to consider responses, organize campaigns, and raise money.
This is true for both non-governmental organizations (NGOs) and for
governments. NGOs, if they are swift, can sometimes begin to deliver
initial supplies within a week or so, but significant policy responses from
international governments generally take longer.
Third, in the case of donor governments especially, most official aid
agencies find it difficult to respond quickly. Their operating culture, and
the usual planning and disbursement procedures, are not geared for rapid
action. Indeed, the culture of the western aid industry is to exercise caution
and restraint, to build in strong checks against corruption, and to call for
surveys to be prepared before committing themselves to action. All of
these things militate against a rapid response.
Staging Issues: Policy Considerations
Some of the policy implications of focusing on the different stages of

disaster response are discussed below. But two issues for policy may be
mentioned here.

Conclusion 229
First, the most urgent need in the period immediately after a disaster is
for fast assistance. The first 24 hours – and indeed the first few hours – are
crucial. The medical (and military) concept of ‘the golden hour’ is relevant
in this context. The golden hour refers to the first 60 minutes after a major
disaster or medical event and is so called because the victim’s chances of
survival are greatest if emergency assistance can be provided within that
time. In emergency medicine, for example, the golden hour is the first hour
after injury during which treatment greatly increases survivability. The idea
has been adapted to post-conflict transition terminology where it is often
taken to be the first year after hostilities end. Without steadily improving
conditions in the first year, popular support declines and chances for eco-
nomic, political, and social transformation begin to evaporate.
However, despite the great importance of responding to disasters
quickly, international donors have given relatively little attention to con-
sidering the implications of the need to respond quickly for their usual
modes of operation. One step towards improved international disaster
response policies would be for the international donor community to
understand that the current cumbersome bureaucratic responses are often
just far too slow, and to design systems that allow for the rapid provision
of aid directly to affected populations.
Second, the lack of recognition given to local responses following the
Asian tsunami is worrying. This is, perhaps, a reflection of what Gunnar
Myrdal referred to as ‘the beam in our eyes’ in Asian Drama, his major
work on Asian development issues (Myrdal 1968: 5–35), where he dis-
cussed the tendency of western institutions working on global development
issues to see issues in western terms. The recent experience in the provision
of international disaster relief following the Asian tsunami suggests that
one of the consequences of the beam in donors’ eyes is a failure to pay
sufficient attention to the key role of national and local communities in
disaster-affected countries. Data compiled by the Tsunami Evaluation
Coalition (TEC) (Kessler 2006; Marulanda and Rizal 2006) provides valu-
able information on the size and nature of activities supported by national
and local agencies following the Asian tsunami. Commenting on these
issues, the TEC (Bennett et al. 2006: 50–51) observed that:
As might be expected, in the first days and weeks after the tsunami the non-
affected community provided assistance and took in the bulk of those dis-
placed. Yet insufficient analysis and acknowledgement of community self-help
in disasters has two results: first, it perpetuates the myth of dependency on
external aid; second, it shields the aid establishment from the responsibility to
build their responses on local capacities. Self-help and hosting of survivors was
backed by little financial or material assistance from the governments, and was
rarely reported or acknowledged.

The TEC and other reports on these issues serve as an important reminder
that a central objective of international donor programs following dis-
asters should be to cooperate with, and strengthen, national and local
response programs rather than dominate the recovery effort.
THE COORDINATION PROCESS
The coordination of large, complex aid projects involving numerous

actors is always difficult. So it proved with the delivery of post-tsunami
assistance in Asia.1 Coordination arrangements naturally varied from
location to location and country to country. In some locations where the
number of actors was relatively small, coordination was less of a problem.
But generally in countries such as Sri Lanka and Indonesia where the
donor presence was large, coordination proved very challenging. Various
issues of coordination arose: the multiplicity of actors; lack of coherence;
differences in objectives; managing expectations; and oversight of financial
arrangements. Each of these is discussed in turn.
Multiplicity of Actors
In countries such as Indonesia, India, and Sri Lanka, the first coordination
challenge was to somehow arrange an acceptable level of liaison between
the quite bewildering array of organizations who involved themselves in
the assistance effort. Participants in a UN workshop in 2005 (as well as
many other observers) commented on the problems (UN 2005: 3–4):
The very large number of often diverse actors created acute coordination chal-
lenges, particularly during the first weeks of the response phase. Local authori-
ties, who were in charge of directing the relief efforts, were often weakened
by severe human and material losses, and at times had to cope with unclear
reporting lines and interference from various government bodies. Many non-
governmental actors, who had little or no experience in humanitarian relief,
were unwilling or unaware of the need to coordinate with other partners. In
some cases, the very high budgets at the disposal of some NGOs acted as a
disincentive to coordinate action. Even large international organizations with
a long history of involvement in humanitarian operations, at times took initia-
tives without consultation with other partners, and in some cases bypassed the
government. At the same time, it was recognized that some of the coordination
mechanisms that were put in place were dysfunctional, which encouraged some
actors to work independently.
In Indonesia, for example, there were numerous multilateral and bilateral

donors, a wide variety of national agencies, and by one count over 400

Conclusion 231
NGOs active in the field (Masyrafah and McKeon 2008: 18). In Tamil
Nadu in India, an NGO coordination centre was established with eleven
teams to work with a reported 600 NGOs (TGLL 2009: 26). In Sri Lanka,
around 180 agencies and NGOs were involved in providing relief as well
as the LTTE (Liberation Tigers of Tamil Eelam) separatist group in the
north of Sri Lanka (see Chapter 5). Many of these agencies had their own
difficult management issues to deal with as well; the BRR in Indonesia
implemented over 5000 of its own projects while being required to coordi-
nate the work of numerous other bodies.
The influx into a disaster zone of a multiplicity of extremely diverse
agencies of this kind inevitably gave rise to all sorts of difficulties. The
arrival of a large number of new staff, most of whom could not speak local
languages, placed considerable strain on local systems. For some time
after the disaster, basic transport and infrastructure systems were barely
functional in some of the affected countries. In Banda Aceh (Wiharta et
al. 2008: 88):
Witnesses report that the airport was a scene of total mayhem, with relief sup-
plies strewn around the runway. Flights landed, tossed out humanitarian aid
supplies wherever they could and took off immediately. There did not seem to
be anyone in charge. By the end of December 2004 the airport, whose air traffic
control tower was damaged, had to handle an average of 132 flights daily.
Under normal circumstances, it had to manage only eight flights per day.
The new arrivals needed housing and transport, wanted priority access
to communications, sought to hire the best local staff, demanded quick
access to senior local officials, and were often under instructions to make
arrangements for early high-profile visits by senior officials or politicians
from their headquarter agencies or countries (Bennett et al. 2006: 38).
Lack of Coherence
Not surprisingly, under such circumstances it is difficult to arrange coher-

ence of aid programs. Problems of lack of coherence in the global aid
industry, and even open competition between aid agencies, have been
widely discussed in the development literature. The following observation
from an UNCTAD report (UNCTAD 2005: 4) refers to delivery of aid in
Africa but it might just as easily have been written about the coordination
of post-tsunami assistance in Asia:
Another major source of the inefficiency and ineffectiveness of much aid is the
lack of coherence among donors and their objectives and requirements, and
a failure to reconcile these with the needs, priorities and preferences of the

countries receiving assistance. The sheer multiplicity of donors, with differ-

ent outlooks, accounting systems and priorities have created a landscape of
aid that, at best, can only be described as chaotic. This has in turn stretched
the administrative capacities of the recipient countries to breaking point and
undermined any pretence of local ownership of development programmes. The
institutional capacities of the receiving countries have been further weakened
by the pressures to reduce the size and functions of the state, a prominent
feature of the adjustment programmes driven by international finance institu-
tions. The situation is exacerbated by the presence of numerous new bodies
such as NGOs through which aid is often disbursed with little or no oversight
by the recipient government or other national institutions. Coping with such
a situation would stretch the abilities of the bureaucracies of the Organisation
for Economic Cooperation and Development countries, let alone those of poor
African states.
It is partly because of problems like this that some observers have spoken
of the incoherence of the international humanitarian system.
This problem of lack of coherence was no secret amongst those involved
in the provision of post-tsunami assistance in Asia. The problems –
problems, in a sense, of excess competition between aid agencies – were
discussed in many reports about activities in the field (Bennett et al. 2006;
TGLL 2009). Various attempts were made to improve coordination.
Several of the main multilateral organizations, such as the United Nations
Development Programme and the World Bank, established mechanisms
designed to encourage donors to harmonize the delivery of aid. One of the
best known of these mechanisms was the Multi Donor Fund (MDF) estab-
lished by the World Bank in Indonesia (MDF 2008; Thornton 2006).2 Just
as effective were the coordination arrangements established by national
governments. In Indonesia, the Badan Rekonstruksi dan Rehabilitasi
(BRR) was established in April 2005; in Sri Lanka, TAFOR (Task Force
for Relief) and TAFREN (Task Force for Rebuilding the Nation) were set
up in early 2005; and other local coordination arrangements were made in
most of the other tsunami-affected countries.
One abiding difficulty with most attempts to improve coherence was the
tardiness of hundreds of aid agencies in participating actively in coordina-
tion arrangements. Many individual agencies paid lip service to the need
for coordination but were never keen to be coordinated. According to
the TEC, for example, of the 438 NGOs registered with the Indonesian
government in either Jakarta or Aceh, by mid-September 2005 only 128
had provided their activity reports to the BRR (Bennett 2006: 40). An
important contributing difficulty in strengthening coherence is that multi-
lateral agencies, bilateral agencies, national organizations, and hundreds
of NGOs make up an extremely varied group of organizations. Further,
many of the agencies were under pressure to respond to all sorts of different

Conclusion 233
internal and external rules and incentives. Donor bilateral agencies, for
example, often needed to comply with quite strict administrative require-
ments and political pressures determined thousands of kilometres away in
donor capitals. Because Indonesia had a reputation as a corruption-prone
country, most bilateral donors were under instructions from headquar-
ters to maintain tight oversight over the expenditure of tsunami funds
in Indonesia. For example, when announcing an increased Australian
contribution to Indonesia to support tsunami relief and other activities in
early 2005, the Australian Foreign Minister Alexander Downer noted that
Australian officials would retain responsibility for spending Australian
monies. He said that the Australian government was not prepared to del-
egate this authority to other agencies.
There is no easy answer to the problem of the excessive competition
between aid agencies which often arises during complex international
disasters. The incentives for them to cooperate are usually weak. In an
ideal world an international or national institution with sufficient powers
to induce strong and effective coherence across numerous agencies would
be established. But in practice, it is often difficult for developing coun-
tries to arrange for effective cooperation from international donors. The
establishment of a strong and credible national agency, such as the BRR
in Indonesia, is usually a very helpful step in the right direction (Bennett
2006: 39). Multilateral coordination can help as well. But much depends
on the goodwill and readiness of numerous, often hundreds, of assistance
agencies to cooperate. When incentives to cooperate are weak, then coor-
dination is likely to be difficult.
Differences in Objectives
Differences in objectives between the many organizations providing assist-

ance also became evident. At one level of course, the overriding objective
for all agencies was the same – to assist with relief and recovery after the
disaster. But a broad objective of this kind can be interpreted in many
ways. As noted earlier in Chapter 2, donors often have multiple objectives
in mounting relief and assistance programs. Naturally, differences of this
kind in objectives became evident at the agency level during the delivery
of tsunami assistance. It is clear that many organizations had an eye to
self-promotion or to the advocacy of programs endorsed by headquarter
agencies. Indeed, it seems clear that many donors provided support in cash
or in kind with all sorts of other explicit or implicit objectives in mind.
Differences in objectives with respect to timing, the preferred type of
assistance, and various broader issues (relating to conditionalities and
advocacy-type issues) all became increasingly evident soon after the relief

effort got underway. Differences with respect to timing and the preferred
type of assistance are most clearly reflected in the delivery of aid, so these
issues are discussed below. But the multiple objectives which various
donors had relating to broader issues call for additional comment.
One set of broader issues related to foreign policy.3 These considera-
tions were perhaps most evident in the American and Australian aid assist-
ance programs. In the case of America, the US response needs to be seen
against the growing difficulties that America was having in relations with
the Muslim world following the invasion of Iraq over 18 months earlier.
By late 2004 there was a growing realization in the US that for geopolitical
reasons there was a need to look for opportunities to improve relations
with the Muslim world. Thus there was strong political support within the
US for a substantial and highly visible American official response to the
tsunami disaster in Indonesia. In London, for example, in a news article
headed ‘US sees aid to Muslim victims as chance to improve image’, The
Times (3 January 2009) reported that4
The United States has a golden opportunity to repair its tarnished image in
the Muslim world by leading the relief effort, senior senators said. President
Bush stamped his personal seal on America’s multimillion-dollar tsunami aid
package as the US seeks to turn Asia’s humanitarian disaster into a political
opportunity . . . . Richard Lugar, Republican chairman of the Senate foreign
relations committee, said that the disaster offered a remarkable opportunity for
the US to present a compassionate face. . . . Mr Lugar said that aid, so-called
soft power, could be a breakthrough for the US in the region. Carl Levin, the
senior democrat on Mr Lugar’s committee, said ‘This is a political opportunity
to reach out to the Muslim world and let them know that our humanitarian
assistance is across the board, and that we treat the Muslim world as an essen-
tial part of the world community.’
President Bush immediately sent the Secretary of State, Colin Powell, to

Southeast Asia and despatched the aircraft carrier USS Abraham Lincoln
to North Sumatra to distribute assistance. During the following few years,
numerous senior US officials and leaders visiting Indonesia made frequent
public references to the US assistance provided under the tsunami aid
program.
Australia, too, had foreign policy reasons to provide a sizeable response
quickly, and did so. A little over a week after the tsunami, on 5 January
2005 the Australian government announced an unexpected and greatly
expanded program of A$1 billion of new and additional assistance to
Indonesia to be delivered (through both loans and grants) over a five-
year period (Tomar 2005). It was announced that the assistance would be
coordinated through a newly formed Australia–Indonesia Partnership for
Reconstruction and Development. The background to this unanticipated

Conclusion 235
initiative was that for some years, Australia’s relations both with Indonesia
and with several other countries in Southeast Asia had been strained.
Various issues, including the events surrounding East Timor’s transi-
tion to independence, Australia’s regional refugee policy, and several
other matters had been complicating Australia’s relations with the region
(Buckley 2005).5 The rapid and decisive provision of substantial assistance
to Indonesia helped Australia rebalance relations with Southeast Asia.
The move was seen by the Australian media ‘as a foreign policy master
stroke in developing close ties with Indonesia in keeping with Australia’s
status as a regional actor’ (Tomar 2005). But there is no doubt, too, that
there was widespread and deep sympathy across the Australian commu-
nity for the pain the tsunami disaster had brought to Indonesia, so the
Government’s decision received overwhelming public support.
One other aspect of the Australian Government’s decision to expand
aid to Indonesia immediately after the tsunami should be noted. It was of
some significance in terms of foreign policy that the details of the govern-
ment’s announcement made it clear that all areas of Indonesia, not just
regions affected by the tsunami, would be eligible for assistance under
the expanded program. Although numerous media and official reports
included the total amount of A$1 billion as part of the total international
funding provided for tsunami relief, there was in fact no indication in the
Australian government’s announcement of what share of the package
would be devoted to tsunami assistance activities. A Research Note issued
by the Australian Parliamentary Library in March 2005 observed that ‘It
is quite possible that most of the grant aid and loan component will be
spent on projects outside Aceh . . .’ (Tomar 2005). It therefore seems clear
that the Australian government’s decision to expand aid to Indonesia sub-
stantially in early 2005 was designed to be a significant foreign policy step
as well as a rapid response to a large humanitarian disaster in the region.6
The second main set of broader issues concerning objectives related
to so-called cross-cutting considerations – that is, sectoral issues seen as
usually needing consideration when assistance is being delivered. These
are matters which it is expected should be allowed for, whenever possible,
in the design of all assistance programs. The most important of these in
case of post-tsunami aid programs related to peace-keeping and security
issues, gender considerations, and the environment – which are discussed
in more detail in a later section. Here we simply point out that these added
to the set of objectives of the assistance effort.
Thus the many aid agencies which arrived in the tsunami-affected coun-
tries to provide assistance brought a varied agenda of cross-cutting objec-
tives with them. In practice, both international and national post-tsunami
assistance was provided against a veritable kaleidoscope of objectives.

It is true that immediate humanitarian relief and longer-term rehabilita-

tion and reconstruction were the main objectives for most aid agencies.
However it would be a naive observer who failed to notice that the totality
of objectives underpinning the numerous assistance programs across the
main tsunami-affected countries presented a wide and complex agenda.
Managing Expectations
Part of the job of delivering assistance programs following a disaster is

the management of expectations. If communications, and the associated
information flow between donor agencies and recipient communities, are
not handled carefully, then misunderstandings are likely to arise. And in
retrospect, it can be seen that unrealistic expectations about aid programs
were built up in the aftermath of the 2004 tsunami in Asia. One report
issued from the Office of the UN Special Envoy for Tsunami Recovery
(Wall 2006: 11) noted that:
The phenomenon of broken promises has become one of the catchphrases of

the relief effort in Aceh and, to a lesser extent, in Sri Lanka. . . . Typically,
after the tsunami, an aid organisation would approach a community, carry
out a needs assessment, or discuss possibilities, and then leave. The organisa-
tion might think they had merely gathered some information that would form
the basis for a decision on possible assistance. The community, meanwhile,
would assume that they had just received a firm commitment for assistance.
Sometimes the organisation did not return. But the community would wait,
growing more impatient, sometimes turning away aid from other organisa-
tions. Organisations that went back to such communities after some time were
shocked at the hostile reception.
In fact, it appears that misunderstandings resulting from poor communi-

cations rather than broken promises were often an important part of the
problem. But ‘the perception of broken promises has done a great deal to
shape the perceptions of aid organisations’ (Wall 2006: 11).
One incident which attracted international attention at the time was the
decision by a group of ‘furious tsunami survivors’ in the village of Pasi
in Aceh to reject promised assistance from the UK-based (international
NGO) Oxfam (Hasan 2006). In April 2006 it was reported that the villag-
ers in Pasi ‘had agreed to demand a divorce from Oxfam’. Tempers had
exploded several months earlier when an Oxfam officer visiting the village
was attacked by villagers who were frustrated by delays in the provision
of promised housing. Oxfam, in turn, responded quickly to the local prob-
lems which were largely due to complex land rights issues as well as scarce
building supplies. Oxfam was certainly not alone in having to deal with
difficult problems of meeting heightened expectations amongst affected

Conclusion 237
communities. The main significance of this particular incident is that it

illustrates the problems which can arise when communications between
aid providers and beneficiary communities become difficult.
The proper management of communications, particularly in periods fol-
lowing a major disaster, is a skilled task. In developing countries in Asia
in the period after the 2004 tsunami, problems of communication between
donors and affected communities were exacerbated by the widespread
use of translators and aid jargon, and by the extreme levels of distress
widespread in the region. Considerable improvements in communications
processes are, in principle, possible. But better arrangements need to be
supported by increased funding, a strong political and institutional com-
mitment to the idea of good communications, the recruitment of profes-
sionals to design programs, and capacity building for local government
officers in such things as accountability and transparency processes to
enhance relationships with local communities. Given current constraints
on local governments such as limited availability of funding, shortages
of skilled staff, and numerous other priorities, it is not clear how quickly
progress is likely to be made.
Oversight of Financial Arrangements
The coordination of financial arrangements proved very difficult. There

were a range of interrelated problems (see Chapter 3).
First, it was often unclear who had promised what. In complex emer-
gencies it is common for governments to make impressive statements
promising significant responses which, on closer examination, are unclear
on details. For one thing, as noted in Chapter 3, governments pledged
assistance in a mixture of currencies, in a mixture of loans and grants,
with all sorts of conditionalities attached, and for uncertain time periods.
For another thing, although there was much talk of the generosity of the
assistance provided, there is no agreement at all about what constitutes an
adequate level of funding in responding to large scale disasters.7 Across the
world, responses tend to be ad hoc, determined by the mixture of factors
which donors choose to consider at any particular time. From one point
of view, the tsunami relief effort was well funded, at least by comparison
with many other disasters in developing countries. But when compared
with the much more adequate funding provided for disaster relief within
rich countries, the funding was meagre.
In addition, unfortunately many of the claims made by donors about
transparency and accountability of funding were not fulfilled. The prob-
lems were so widespread that there is little point in singling out specific
agencies. However some instances of difficulties can be mentioned to

illustrate the nature of the issues. For a start, as noted above, ambitious
promises raised expectations – but later led to suggestions of ‘broken
promises’. Further, as noted in Chapter 3, in practice it soon became dif-
ficult to follow which agencies were spending how much, and on what.
Telford and Cosgrave (2007: 6) concluded that ‘the international system
for tracking and accounting for funding flows is seriously inadequate’.
A third main problem with funding arrangements was that, too often,
national governments and local agencies were denied ownership of the
programs. In practice, in the delivery of tsunami aid many donors, espe-
cially international agencies, were not willing to hand over financial man-
agement of the programs to national agencies. There is a dilemma here
to which there is no easy answer. On one hand, in recent years donors
themselves have increasingly emphasized the importance of country own-
ership in the delivery of aid. The need to strengthen national ownership in
the management of aid was one of the key themes of the Paris Declaration
on Aid Effectiveness agreed to in early 2005 by all major OECD donors
and representatives from many developing countries.8 On the other hand,
international donors are also under strong pressure from headquarter
agencies in capitals to ensure high standards of accountability and trans-
parency (also emphasized in the Paris Declaration). It is therefore perhaps
not surprising that foreign aid officials, faced with all sorts of problems
of accountability when disbursing funds under high-risk conditions in the
field, were reluctant to give up responsibility for financial controls. But it
is also not surprising that officials in recipient governments felt that this
approach reduced national ownership of activities in their own countries.
DELIVERY OF ASSISTANCE
Initial problems of planning for aid coordination were soon reflected in

practical difficulties in the delivery of aid in the field. Various issues arose:
different donors wanted to supply different types of aid; the staging of the
provision of aid varied depending on the preferred type of aid; there was
constant need to make allowances for cross-cutting issues; at every stage,
issues of financial control were important as well. All of these issues com-
bined to make the overall coordination of aid delivery difficult.
Types and Timing of Aid: Relief, Rehabilitation, Reconstruction
The delivery of physical assistance following a large scale disaster is

an extremely complex logistical operation. As we have seen, in the first
few hours after the tsunami disaster it was local, often informal and ad

Conclusion 239
hoc responses that provided immediate assistance. But as official relief

mechanisms began to get underway, the problems of coordinating the
movement of supplies and people quickly multiplied. The types of aid pro-
vided during the different relief, rehabilitation and reconstruction phases
varied considerably so different approaches to coordination were needed
(Figures 2.1 and 4.4 above). Some aid providers (such as the US Navy
and the INGO Médecins Sans Frontières) had the objective of providing
humanitarian and relief aid for a relatively short period of perhaps a few
months and then winding down their activities. Other agencies took a
longer-term view, placing more emphasis on the goal of providing medium
or long-term support for reconstruction and rehabilitation over time.
These differences in timing were naturally reflected in the preferred type
and sector of assistance as well.
In the initial period of the official response, the most urgent priority
was the provision of emergency relief and humanitarian assistance. As
the scale of the disaster became clear it was realized, first, that the needs
for immediate assistance were very large, and that second, the main relief
phase would stretch out for much longer than first anticipated.
It was largely unavoidable that during the early relief stage, coordina-
tion of activities was very difficult. On one hand, large numbers of aid
workers representing many different agencies arrived on the scene offering
supplies of all sorts of goods and services. On the other hand, the needs
of the disaster-affected local communities were not clear. The first wave
of assistance brought supplies of items such as food, water, clothing,
temporary shelter, and emergency medical supplies. These were provided
by official international, bilateral and national civilian agencies, domestic
and international NGOs, and by police and military personnel as well. The
American government, for example, despatched an aircraft carrier while
the Australian government sent several destroyers to deliver assistance in
Aceh. The coordination of civilian and military agencies was not easy. In
a review of the implications of using foreign military assets as part of the
international response after a major natural disaster, Wiharta et al. (2008:
xiii) observe that:
Coordination between civilian humanitarian actors and military assets has

been one of the greatest challenges created by the increasing deployment of
foreign military assets. The differences in cultures, priorities and operating
modes between military personnel and civilian actors have an impact not least
on information sharing between the civilian and military spheres. Information
sharing is crucial to the success or failure of any relief operations.
Clearly, it is extremely difficult to coordinate the activities, for example,

of helicopters from offshore foreign warships staffed by personnel who

communicate in English with assistance delivered by local NGOs who

work in local languages.
Numerous reports indicate that the most urgent needs of affected com-
munities were generally catered for. However it seems clear that some key
social and psychological priorities were neglected. One urgent need which
received somewhat haphazard attention was for survivors to find out what
had happened to other members of their families who had disappeared –
either carried away by the tsunami and saved, or just as likely, drowned.
Numerous attempts were made, of course, to reunite families. However in
some cases it took weeks or months for family members to find each other.
In other cases, survivors had many months of uncertainty before having
to accept that their loved ones had probably died. Further, many survivors
suffered debilitating periods of trauma in the wake of the disaster. The
need to address these problems as priority issues was acknowledged but in
practice often received low priority.
Within a month or so, initial planning for longer-term rehabilitation
and reconstruction activities got underway. One of the most urgent needs
was for housing so numerous agencies developed housing programs. Many
reports suggest that the arrangements made by different agencies for the
supply of housing varied widely. On the one hand, there was pressure from
tsunami survivors living in temporary accommodation to be rehoused
as soon as possible. On the other hand, there were all sorts of potential
risks involved in constructing new housing too quickly. Problems which
delayed housing programs included planned changes to government regu-
lations following the tsunami, disputes over land title, uncertainties over
housing designs, lack of infrastructure, and disagreements between aid
donors as to who was responsible for what.9
A second priority for rehabilitation activities was to move quickly to
try to reinvigorate local private sector and informal commercial activi-
ties. Local livelihood programs were one of the main ways by which many
assistance agencies tried to do this (ILO 2005; Nowak and Caulfield 2008:
25–37). The immediate impact of the tsunami on local economies which
received a direct hit was to destroy virtually all commercial activities. In
most cases, survivors lost all income-earning assets (fishing boats, local
vehicles, stalls and small shops, and the like) immediately. Most local com-
mercial activity ceased entirely, creating instant widespread unemploy-
ment and loss of almost all income. The economic shock was remarkable.
To be sure, there was a small revival of some economic activities once aid
flows got underway. However, much aid expenditure went on goods and
services purchased elsewhere. Much of the aid spending did little, in the
short term, to directly reinvigorate the local informal economy.
But although most disaster relief in developing countries has traditionally

Conclusion 241
been in kind, this does not have to be the case. In fact, cash for work
(CFW) programs soon became a prominent part of the tsunami response
in some parts of Asia (Doocy et al. 2006: 278):
Many organisations launched cash interventions after the Asian tsunami

and large-scale CFW programmes were widespread in Aceh, Indonesia, and
Sri Lanka, with tens of thousands of beneficiaries participating in CFW pro-
grammes operated by multiple international non-governmental organisations
(INGOs) and the United Nations Development Programme (UNDP), some-
times in partnership with local non-government organisations (NGOs). In the
post-tsunami context, where livelihoods were destroyed and assets lost, CFW
programmes provided income, contributed to community rehabilitation, helped
to meet financial needs and had positive social effects in tsunami-affected com-
munities. While CFW programmes have been utilised in a variety of contexts,
they have never been implemented before on the scale observed following the
Asian tsunami.
Cash-based programs have pros and cons (Harvey 2006; Harvey 2007;
Kelaher and Dollery 2008). Disadvantages of cash-based approaches for
emergency relief include difficulties in targeting, the possibility of misuse
of cash, and the risks of conflict between recipients who are eligible and
those who are not. In situations where supply channels have been severely
disrupted cash payments may simply bid up prices of available goods
rather than help meet needs. As against this, advantages include the speed
with which help can be delivered, the sense of self-reliance that cash gives
to recipients, and the multiplier effects that additional spending has on
local economies.
Longer-term planning for activities such as physical and social infra-
structure take some time. Official assistance agencies – caught up as they
are in the byzantine red tape of coordination mechanisms, conferences,
planning, studies of all kinds, and contract administration – find it hard
to be nimble. Thus the first major meetings to discuss the international
response to the disaster were not held until February 2005; some major
national organizations such as the BRR in Indonesia were not established
until April 2005; and planning for several of the larger infrastructure
projects did not get underway until the end of 2005, almost twelve months
after the tsunami. Some observers saw these responses as ‘leisurely’.
By early 2006 the initial relief stage of assistance was largely complete
and there was increasing emphasis on rehabilitation and reconstruction.
Significant progress in the provision of housing had been made. Throughout
2006 and into 2007 the overall approach to the delivery of post-tsunami
assistance underwent a significant change. Larger scale infrastructure
projects began to get underway, well-developed housing programs were
in the process of implementation, and activities to encourage livelihood

activities were receiving strong support (Thorburn 2009). Reliable data on

overall spending is not available. However a broad guess would be that by
the end of 2007, three years after the disaster, perhaps half of the funding
originally promised by international donors had been spent.
During 2008 and into 2009, both international and national agencies
were moving to scale down post-tsunami programs. Many housing pro-
grams had been completed; livelihood and business programs were being
phased out; and while spending on remaining infrastructure projects con-
tinued at a fairly high level, plans were to ensure that the main projects
would be substantially completed by the end of 2009.
Cross-cutting Issues
Cross-cutting issues were recognized as requiring attention as soon as the

large-scale relief effort got underway. Four cross-cutting issues, in particu-
lar, were seen as being of high priority: peace-keeping; social participation;
women and children; and the environment.
In the case of both Indonesia and Sri Lanka, and to a lesser extent
Thailand, the tsunami arrived at a time when local security issues
were posing major problems for national policy makers. In Indonesia,
Acehnese resentment at heavy-handed rule from distant Jakarta had been
simmering for years. The local Free Aceh Movement had mounted wor-
rying challenges to national authority within the province of Aceh (He
and Reid 2004). In response, the Indonesian government had established
a significant military presence which, in turn, had fuelled local resent-
ment. In Sri Lanka, the problem was rather different. Tension, and open
clashes, between the central government and the LTTE had severely tested
the authority of the central government. Whilst in Indonesia the security
problems in Aceh were at the periphery, in Sri Lanka security issues con-
cerning the LTTE had become an overriding concern for national govern-
ment. In contrast, in neither Thailand nor India were security concerns of
this kind significant issues in providing post-tsunami relief.
It was quickly realized, in both Aceh and Sri Lanka, that immediate
priority needed to be given to negotiate peace agreements in the bitter
local conflicts that had been underway before the tsunami. The cessa-
tion of conflict was important, of course, so that aid could be provided
to disaster-affected areas. In addition, many people hoped that in the
period of local anguish following the disaster, there might perhaps be a
window of opportunity to establish lasting peace agreements as the war-
and disaster-affected communities resolved to look to the future rather
than the past.10 In Sri Lanka however, little significant progress towards
a peace settlement was made (see Chapter 5). A little over a year after the

Conclusion 243
tsunami, open hostilities between the central government and the LTTE
were resumed. But in contrast, in Aceh, following the tsunami there was
a renewed willingness on all sides to look for compromises. International
delegates joined with high-level negotiators from Jakarta, including
Vice-President Jusuf Kalla, to broker a peace agreement announced in
August 2005.11 In the eyes of many observers, the peace settlement in
Aceh reached shortly after the tsunami demonstrated that sometimes
traumatic events such as national disasters can open the way to dramatic
political and social changes. Some specialists in peace and governance
issues therefore urge that security issues should be included on the agenda
of key cross-cutting issues in the wake of major disasters in developing
countries.
Social participation was recognized as important because social barriers
caused by factors such as gender, age, religion or occupation can restrict
access to assistance in the wake of a disaster. Commenting on the need for
attention to social participation, former UN Special Envoy for Tsunami
Recovery Bill Clinton said that12
Without a dedicated effort to change historical patterns of inequity, tradition-

ally marginalised or disenfranchised groups will continue to lack both the
political awareness and power to demand their fair share of recovery resources.
. . . And the problem can be compounded by a post-disaster influx of new assist-
ance providers who have little knowledge of the context in which they are oper-
ating, including structures of inequality, chronic poverty and vulnerability.
In India, for example, more than a quarter of the population affected by

the tsunami belonged to underprivileged and marginalized social groups.
They included people working in the fishing sector who lost their jobs
when fishery activities came to a halt in the wake of the disaster, landless
labourers, and salt-pan workers, many of them women (TGLL 2009: 38).
Steps are needed, therefore, to ensure that local people in communities
affected by disasters in developing countries are consulted on relief and
rehabilitation programs. In the language of the international aid commu-
nity, local people need a voice.13
Issues affecting women and children received close attention from
donors as well (Nowak and Caulfield 2008). Numerous reports from agen-
cies in the field drew attention to the various ways that women, as well as
the children they often cared for, were disproportionately affected by the
tsunami and disadvantaged during the subsequent relief efforts. Women
and children were disadvantaged from the moment the disaster struck.
Tsunami survival rates were significantly higher for men than for women
and children. Post-tsunami data show that up to twice as many women
were killed as men.

Nowak and Caulfield (2008: 32), for example, observed that:
There has been a disproportionate negative impact on Acehnese women follow-

ing the earthquake and tsunami. This imbalance decreased women’s opportu-
nities to have a voice in the planning and reconstruction of their communities.
Even more striking is the point raised by a woman activist in the Aceh Women’s
League, who noted that women were not only excluded in the post-tsunami
relief process, but they were not considered in the implementation of the peace
accord. Since women’s role in the peace was not acknowledged they have no
role as participants in the peace process.
And Telford et al. (2006: 35) reported that:
The raw death toll tells only part of the story. Disproportionate numbers of the
most vulnerable people died. . . . More women than men died. This was high-
lighted early on when Oxfam announced that, in the villages it had surveyed,
there were three times as many adult male survivors as female ones.
It seems that one of the main reasons for this, quite simply, is that men had
a better chance of escaping the flood waters than women. Men were able
to run faster or climb trees more easily than women who, in any case, were
often encumbered by the need to look after children. It is clear that women
in many of the affected communities faced a wide range of problems,
ranging from lack of access to aid programs, legal rights and housing, to
domestic violence (IDLO and UNDP 2007). The sad truth is that when
terrible disasters in developing countries strike suddenly, it is often a case
of ‘women and children last’.
The indications are that men often fared better during the later aid
delivery phase as well. Several surveys of the assistance effort were critical
of the relative lack of attention to gender issues in aid delivery (Bennett
2006: 58; Clinton 2006: 6–7). Positions of leadership in the tsunami-
affected communities were generally held by men. Men tended to speak
for the communities, not always properly representing the special needs
of women and children. Issues such as lack of privacy and security, and
the dangerous living conditions found in some temporary barracks,
often affected women and children more than men. Men could generally
more easily spend much of their time away from the confines of the bar-
racks than could women and children. Men often found it easier to take
advantage of new job opportunities that opened up as the rehabilitation
programs got underway.
Environmental matters attracted considerable debate at times as well.
Some research workers drew attention to the protection that natural
defences provided against the tsunami in Sumatra and argued that
‘healthy coral and mangrove are reported to have saved lives during the

Conclusion 245
recent tsunami’ (Montgomery 2006: 69). They urged that lessons from
this experience should be incorporated into the design of rehabilitation
programs. Other environmentalists were concerned that the building
boom expected to occur as housing reconstruction activities got underway
would lead to the uncontrolled exploitation of valuable forestry resources.
It seems clear that the sharp increase in the demand for timber for housing
did indeed encourage careless logging practices. Indriatmoko (2006), for
example, reported that during 2005 in North Sumatra:
Lowland forest and mountainous forest have become highly exploited due
to the high increase of timber demands during the reconstruction period. . . .
Prolonging politically armed conflicts hampered the natural resource manage-
ment in Aceh. . . . armed rebels dominated the utilization and exploitation of
natural resources including forests. [The] Helsinki MOU, 2005, has brought
negative impacts to forest, since many irresponsible parties make use of the
situation to freely enter the forest and cut the trees . . .
Certainly, as post-tsunami reconstruction programs picked up pace in 2005

and 2006 the demand for timber and other inputs for building activities
increased. Environmental groups, in turn, became increasingly concerned
about the impact on natural resources that the building boom was begin-
ning to cause. They pressed for more effective regulation but their calls
were not especially effective in face of the strong pressures to provide new
housing quickly. A third concern of environment groups was that proper
environmental planning be undertaken before settlements of thousands of
houses in new locations be approved. Aid agencies acknowledged the need
to consider the environmental impact of new settlements. But this concern,
too, needed to be balanced against the increasing resentment from tsunami
survivors over delays in providing housing. It was not always easy to reach
agreement on the trade-offs between these multiple objectives.
Financial Considerations
Practical problems related to the physical delivery of aid interacted with

difficulties in the financial management of programs as pointed out earlier
in the section on financial arrangements. Sometimes delays in the physical
delivery of aid led to financial problems, and sometimes issues of financial
management caused slippages in the physical delivery of aid.
As we have seen, most donors chose to provide much of their assistance
in kind. In-kind delivery of aid has the advantage (from the point of view
of donors) that the provision of the assistance can be closely controlled.
Donor staff in the field can report back to headquarter agencies that aid
flows, including financial arrangements, have been carefully monitored.

In-kind delivery also means that donor agencies become closely involved
in the numerous decisions which affect trade-offs between the speed of
delivery of the aid, the quantity and the quality.
Delays in spending, which caused increasing frustration amongst
tsunami survivors as time passed, soon became an issue. Four main prob-
lems contributed to the delays. First, many financial managers wanted to
be sure that control mechanisms were satisfactory, and particularly that
proper safeguards existed to provide checks against corruption. As noted
earlier (Chapters 2 and 3), these issues received particular attention from
the donor community in Aceh because Indonesia is widely regarded as
a corruption-prone country. Similarly, the issue of proper controls over
expenditures was seen as important in Sri Lanka.
Second, trade-offs between providing assistance quickly and empha-
sizing quality were naturally reflected in expenditures. As time went on
and delays in spending became a matter for public comment, one line of
defence which some donors adopted was to emphasize the importance of
quality. Proper targeting of assistance was one aspect of quality which
some donors wanted reassurance on. Another was their concern to ensure
that cross-cutting issues were properly addressed. The motto of ‘build
back better’ was frequently mentioned by officials and international
NGOs alike, partly as justification for falling short of the enthusiastic
expectations that some tsunami survivors originally had that facilities such
as new housing would be supplied promptly. But on occasions, groups of
tsunami survivors expressed their own views about the ‘build back better’
approach by demonstrating and throwing rocks at the offices of local aid
agencies.
Yet another reason for shortfalls in expenditure was the delays in project
preparation and construction caused by all sorts of red tape. Delays in
gaining approvals to access land for housing and infrastructure were par-
ticularly common. And to add to the problems, according to numerous
reports, the caution that many officials had in cutting corners was exac-
erbated by the widespread publicity given to the penalties for corruption.
Many officials were said to be cautious about issuing project clearances,
signing contract agreements, or approving expenditures whenever there
was even the slightest doubt about the legality of doing so.
A fourth and major factor was the sharp increase in costs of important
inputs which took place shortly after the disaster. The local economic
effects of a major disaster are, not surprisingly, extremely destabilizing. As
noted earlier, the immediate impact is to cause great damage to the local
economy and, in effect, destroy most local economic activity. But as soon
as there is an influx of external assistance, a sharp increase in demand for
particular types of local goods and services occurs. Depending on local

Conclusion 247
circumstances, this phenomenon can pose significant challenges to policy

makers and therefore warrants some additional comment.
Impact of Financial Flows: A Construction Boom
A surge of financial flows is to be expected as aid arrives following a

natural disaster. Physical asset replacement involving the supply of capital
items (such as fishing boats and nets) that can be imported (either from
overseas or from elsewhere within the country) is relatively easy and can
be arranged as assistance in kind. This type of aid often does not involve
financial transactions. Indeed, fishery equipment was replaced quite
rapidly and, by and large, quite effectively in Indonesia, Sri Lanka and
Thailand. However, large scale reconstruction is different. A large propor-
tion of reconstruction usually involves the replacement of houses, build-
ings, bridges, roads, and other infrastructure. This effort leads to a sudden
increase in demand in local markets for construction materials and labour
inputs.14 Thus the negative economic shock due to the initial disaster is
often followed by a positive ‘demand shock’ in the construction sector. In
other words, there is often a ‘construction sector boom’.
A boom of this nature usually leads to cost increases. The magnitude of
the demand shock depends on the scale of the disaster and the consequent
size and pace of the reconstruction program. The degree to which costs
increase depends on both the size of this demand shock and on the supply
responsiveness of the inputs needed in the construction sector.
If the effects of a disaster are small relative to the size of the national
economy, the supply of inputs that the construction industry needs (both
materials and labour) will tend to be relatively elastic. More generally, this
will tend to be the case both for specific categories of construction materi-
als in abundant supply and for relatively unskilled labour. If all the inputs
in demand are internationally ‘tradable’ and can be imported at more or
less world prices, the extra demand will probably not lead to major price
or cost increases. Many construction materials are indeed tradable – that
is, they can be easily imported from world markets – at more or less
unchanged prices. For these materials, the impact on world prices of even
large increases in demand caused by a local construction program would
tend to be small.15
However it is rarely the case that all of the inputs needed in a recon-
struction program are in elastic supply. Because the supply of some non-
tradable factors (skilled labour is a good example) is usually quite inelastic
in the short run, their prices tend to rise as demand increases. Clearly, the
stronger the boom in local construction, the greater will be the inflationary
impact.16 Shortages of non-tradable factors are likely to be more marked

in the short run than in the long run.17 In the case of skilled workers for
example, this is true for two reasons: first, because over time, more skilled
workers can usually be recruited to ease the shortages; and, second,
because in the medium term, increasing numbers of unskilled workers can
learn specialized construction skills and will thus expand the supply of
skilled labour available. But many factors, particularly specialized types
of labour, must often be supplied from local or at least domestic sources
(and are therefore ‘non-traded’).18
Construction Cost Escalation
The different experiences in Indonesia, Sri Lanka, and Thailand demon-

strate how the interaction between higher demand and supply elasticities
took place in different places following the tsunami. In Aceh, the cost of
building a new 36-square metre house increased from an initial estimate of
US$3000 to around US$5000 by end-2005. The increase was driven both
by rising labour costs – somewhat moderated by the increased willingness
of labour to move into the province of Aceh following the establishment
of peace – and, even more importantly, by price increases in domestically
sourced building materials such as timber.19 According to USGAO (2007:
17):
World Bank data provided by USAID show that construction costs increased
as a result [of the increased demands for construction and labour]. For
example, between October 2004 and October 2005, the average wage for brick-
layers, plumbers, and construction supervisors in Aceh increased 55 percent, 72
percent, and 81 percent, respectively. USAID expects that ongoing demands
for materials and labor will continue to create inflationary pressures.
Overall ‘. . . some key project activities in Indonesia and Sri Lanka –

particularly its signature projects intended to generate increased visibility
for U.S. assistance – have experienced increased estimated costs, are
behind initial schedules, and in the case of Indonesia have been reduced in
scope’ (USGAO 2007: 31).
In Sri Lanka, too, total construction costs for houses planned for
tsunami-affected families rose quickly. Costs were estimated to have risen
by 30–50 per cent by August 2005, and, by September 2006, had increased
over initial estimates by 60–80 per cent or more. While prices of some
materials did increase in Sri Lanka, cost increases were mainly driven by
higher wages for skilled labour (such as carpenters, painters, and masons)
whose wages doubled in some locations (Weerakoon et al. 2007). Skilled
construction labour was in scarce supply in many tsunami-affected loca-
tions so workers had to be brought in from outside the affected areas.

Conclusion 249
While the tsunami destroyed the livelihoods of many people and created
local unemployment, most of the unemployed people (for example, local
fishers, farmers, small traders, and others) had few or no construction
skills.
In contrast, in Thailand construction costs actually declined during
2005 following the tsunami. Nidhiprabha (2007: 11) explains this phe-
nomenon by emphasizing the role of local factor supply elasticities due to
unemployment and excess capacity in the depressed construction sector of
Thailand when the tsunami hit:
The reconstruction activities certainly increased demand in the affected regions

for construction materials and labour. This was seen in the opening of a large
number of construction material shops in the affected areas. However, higher
demand did not lead to price increases. Here it is important to note that the
tsunami-affected areas were not very far from the metropolitan Bangkok
region, and the overall reconstruction activity was small relative to the size
of the Thai economy. What was particularly important was that the higher
demand came in the context of a depressed construction sector at the national
level, reflecting the overall slowdown in economic activity, which was tending
to push prices down. There was considerable excess capacity in the main input
markets for construction. Substantial excess capacity in the steel industry led
to declining prices of steel products used in construction, while prices of wood
and wood products rose less than five per cent over prices in December 2004.
Even though higher oil prices exerted some upward pressure on most materials,
prices of essential raw materials such as cement and steel remained subdued
during the reconstruction period. Overall, the magnitude of the demand effect
was not sufficient to increase prices because there was an elastic supply of
construction inputs.
Thus the particular economic circumstances in Thailand, which had yet

to fully recover from the 1997 economic crisis, meant that inflation in
construction costs in the tsunami-affected areas in Thailand were only
moderate.
Dutch Disease and Reconstruction Following Disasters
This discussion of the impact of the local construction booms follow-

ing the Asian tsunami has marked similarities to issues discussed in the
well-known ‘Dutch Disease’ literature. Whenever a particular sector in a
particular economy experiences a marked boom, the demand for inputs
used in that sector (both factors of production and materials) tends to
increase. This increased demand, in turn, tends to cause negative impacts
for other industries that compete for the inputs used in the booming
sector. The increased prices of inputs raise costs and reduce profitability
in the competing (non-booming) industries. The resulting negative impact

on the non-booming sectors is known as ‘Dutch Disease’, so named after

the experience in the Netherlands of de-industrialization in the wake of
large inflows of export revenues from North Sea Oil in the late 1970s.
The broad lesson is that in general, when countries receive large capital
inflows, including foreign aid flows, expenditure is often concentrated in
certain sectors. These sectors sometimes experience a marked boom while
competing non-booming sectors may need to deal with negative Dutch
Disease effects which flow from the resulting cost increases.20 The cost
increases observed in the construction sectors following the Asian tsunami
are a reflection of these Dutch Disease effects associated with absorption
of financial inflows into the regional economy.
Certain features associated with this phenomenon of aid funds inflow
to finance construction following natural disasters have important policy
implications. Suppose, for simplicity, that two main types of inputs – trad-
able (imported) goods and non-tradable (domestic) goods21 – are required
to support a construction boom (and, more generally, asset replacement
following the loss of assets as a result of the tsunami). Suppose, also, that
these inputs are used in fixed proportions. Given world prices of imported
tradable goods, a given unit of foreign currency will buy a fixed quantity of
imported inputs irrespective of the exchange rate of the recipient country.22
But the amount of domestic non-tradable inputs that a unit of foreign
currency can purchase depends on both the nominal exchange rate and on
the domestic price of those inputs. The cost escalations which reflect the
Dutch Disease are closely associated with the local prices of these domestic
(non-traded) inputs.
If the nominal foreign exchange rate is fixed, the amount of local con-
struction that can be financed for any given amount of foreign aid (say,
US$1 million) will be lower and the higher the domestic rate of inflation
will be.23 The country’s exchange rate policy, therefore, becomes an impor-
tant matter to consider. A policy of propping up the nominal exchange
rate by ‘leaning against the wind’ in foreign exchange markets (as appears
to have occurred, for example, in Sri Lanka following the tsunami) makes
it much harder to fund rehabilitation or reconstruction programs with any
given amount of foreign aid.24 By contrast, domestic inflationary pressures
can be partially mitigated by trade liberalization which tends to reduce the
costs of tradable goods (including imported intermediate goods used in
construction and other aid activities).
Distributional issues also need to be considered. The sensitive matter of
the ‘fair use’ of aid often arises in the wake of a disaster. It is a fact of life
that some people tend to benefit more than others when a Dutch Disease
phenomenon occurs. Because of this, allegations that local traders said
to be ‘monopolists’ are indulging in activities believed to be ‘profiteering’

Conclusion 251
and are ‘exploiting disaster victims’ are not unusual. In fact, it is true that
following a disaster such as the tsunami, the local inflation of prices for
inputs in short supply (such as skilled labour and certain materials) can
create something of a bonanza for suppliers of these inputs. Inflation
therefore tends to create a redistribution of construction-targeted aid
funds, sometimes seen as an unfair windfall gain, to suppliers of these
inputs. The result, within any given budget, is that plans about the scale of
construction need to be revised downwards when the costs of construction
rise, and, consequently, the expectations that have been raised amongst
aid-beneficiary groups tend to be disappointed.25
Given these problems there is surely a case for relieving supply
bottlenecks by encouraging more imports, including the import of skilled
labour. This approach would help reduce cost pressures and support faster
construction programs. Further, an expanded reconstruction program
would inject much-needed funds into the depressed local economy (see the
comments about sharp decreases in incomes in Box 2.2 earlier) and would
help generate jobs for unemployed local people, many of whom often lack
the skills to participate in the construction boom. The extra expenditure
from both imported skilled labour and locally employed labour would,
in turn, have a wider multiplier effect, lifting overall demand in the local
economy. This was observed to be an important aspect of the revival of the
regional economy in Aceh following the tsunami.
Trade-off: Pace and Amount of Reconstruction
How quickly should reconstruction proceed in the wake of a disaster?

Should planners aim, as many locally affected people often prefer, to
repair the damage and to build new houses, schools, and roads as quickly
as possible? Or is it better to go more slowly, and to aim to ‘build back
better’, as many donors decided to do in Indonesia and Sri Lanka follow-
ing the Asian tsunami?
Those who prefer the more measured ‘build back better’ approach
argue that if too much construction is undertaken too quickly, the regional
construction boom is likely to impose unacceptable burdens on over-
stretched local administrative, technical, and economic systems. They
point to the risks of severe localized Dutch Disease effects as inflationary
pressures mount, and also to the risks of leakages of funds if contracting
processes are not carefully managed. The argument in favour of phasing
in reconstruction projects over time is that if the demand for inputs is
allowed to increase in a measured way, supplies of these inputs will be
more elastic. The result, it is suggested, will be that both cost increases and
the leakage of construction funds will be correspondingly lower. A more

phased approach also allows time for training programs to be provided to

local people in at least low-skilled construction activities which has both
a cost reducing effect and a job-creating effect.26 The overall result of this
approach is that more capital assets can be replaced for a given amount of
funding. However, a slower pace of reconstruction imposes various costs:
it delays the creation of the flow of valuable services from the capital assets
so that services are forgone for a longer time. Ideally, a balance needs to be
struck between the high costs associated with a rapid pace of capital asset
replacement and the losses due to delayed reconstruction. It is best that a
program of reconstruction be planned to allow for the costs and benefits
associated with different reconstruction projects. This way, rankings can
be established on an economically and socially sound basis.
There are also political economy factors to bear in mind when consider-
ing the pace of reconstruction. Foreign aid donors do not hang around
forever. Unless funds are put to good use quickly the funds may be diverted
to other activities as donors’ priorities change. There is some evidence that
this happened in the use of donor funds in Indonesia and Sri Lanka fol-
lowing the Asian tsunami. Domestic funding can also be diverted as well.
Delays in reconstruction may lead to funds being used in ways that do
not really meet the needs of the worst-affected groups. In other words, the
costs of delays in reconstruction may fall largely on poor and politically
weak groups. This issue is particularly important because a financing gap
can lead to a rationing of funds. This indeed appears to be the case in Sri
Lanka where reconstruction activities were heavily concentrated in politi-
cally favoured regions dominated by the majority community.
Finally, there are two points that need to be noted. One is that the nega-
tive effects of the Dutch Disease phenomenon during a construction boom
following a natural disaster should not be exaggerated. The most direct
negative impact of a localized construction boom would be on competing
industries outside the local reconstruction areas (probably also in the con-
struction sector in nearby regions). But this negative effect is likely to be
relatively short lived.27 By its very nature, this type of boom is temporary.
It reflects activities that rehabilitate the productive base of the economy
including key economic infrastructure such as roads, bridges, and ports.
A boom of this kind provides lasting benefits that enhance the future prof-
itability of all sectors across the local economy. The main challenge for
policy makers is to maximize the benefits that flow from the boom without
dissipating reconstruction funds in ways that lead to too high windfall
gains for people who were not directly affected by the disaster.
Secondly, it needs to be remembered that cost increases of the kind dis-
cussed above, which are well above economy-wide average inflation levels,
are inevitable. They need to be expected and budgeted for when estimating

Conclusion 253
funding requirements for construction programs. Unless this is done,

funding gaps will emerge. Indeed, it is surprising that the international
disaster management industry apparently did not anticipate this situation
in the wake of the Asian tsunami in December 2004.
LESSONS OF EXPERIENCE
There is a very extensive international literature which discusses lessons
learnt from delivering aid during natural disasters.28 Numerous official doc-
uments discuss disaster risk reduction policy in broad terms (ISDR 2009),
and many reports were issued by different agencies which discussed their
experiences of delivering post-tsunami aid in Asia (ILO 2006; Clinton 2006;
Schwartz 2006). Depending upon the detail, it is possible to list hundreds of
lessons reported by monitoring and evaluation teams working in different
sectors. Rather than survey this literature in detail, the aim here is to set
down the most important broad lessons which emerge from the experiences
surveyed in this book. Eight main lessons are summarized in Box 7.1.
LOOKING AHEAD
The 2004 Asian tsunami was the greatest natural disaster in recent times.
It posed challenges that were unprecedented in scale and scope for both
national agencies and the international community. The delivery of a very
large aid program of perhaps US$17 billion of tsunami assistance in total
across various countries by thousands of agencies was an extraordinary
effort. Many lives were saved. Much long-term assistance was delivered.
One clear conclusion, therefore, is that the major assistance program was
highly successful in achieving the goal of providing widespread help fol-
lowing the 2004 tsunami disaster in Asia.
But there is another important conclusion which should be noted as
well: the international donor community should aim to do better.
Here it is important to emphasize the need to recognize the critical role
of local agencies and communities in delivering relief during the critical
early phase of a natural disaster. International agencies should aim to
strengthen their capacity to cope with natural disasters and see their own
efforts as complementing them. When megadisasters strike in poor coun-
tries, international donors do not always cooperate as well as they should
– either with national governments or with each other. Too many agen-
cies from too many countries with too many goals compete rather than
cooperate to provide aid. The result is that scarce coordination resources

BOX 7.1 SUMMARY OF MAIN LESSONS
1. Objectives The very large number of different donors

involved in the delivery of assistance following the Asian
tsunami, as well as other actors such as the media and policy
makers, had many differing objectives. The effective delivery
of humanitarian emergency relief was one of these objec-
tives, but only one.
2. Local responses The fastest relief after the Asian tsunami
was usually provided by local communities. The key role
that local communities play in providing fast relief needs
more recognition; strategies to improve the capacity of local
communities to cope in times of disaster should receive high
priority.
3. Coordination The overall coordination of the tsunami aid
effort was often very difficult. A large number of different
agencies was involved. The early establishment of credible
national and international agencies with recognized standing
can help improve coordination arrangements.
4. Stages Responses, and the role played by different actors,
varied over time. In planning, it is important to distinguish
between the relief, rehabilitation, reconstruction and post-
assistance stages.
5. Supply-oriented donors Donors often tended to be supply-
oriented rather than demand-responsive. Mechanisms are
needed to ensure that local communities affected by a
natural disaster have adequate opportunities to indicate what
they see as their priority needs.
6. Finance The details of arrangements for the provision of
international finance were often problematic. The perform-
ance of the international donor community sometimes fell
below the standards generally expected in the delivery of
international aid in terms of speed and scale.
7. Cost increases Local Dutch Disease effects, reflected
in sharp increases in some costs for items in short supply,
occurred in some areas after the tsunami. Aid planners
should allow for sharp cost increases, particularly in the con-
struction activities, when drawing up assistance programs.
8. Methods of spending Assistance following the Asian
tsunami was delivered in many different ways. The way in

Conclusion 255
which aid is provided has many implications for, amongst

other things, the speed of delivery and effectiveness of the
assistance. Donors should consider carefully the best way of
providing help; choices include whether the aid should be in
cash or in kind, and what form in-kind aid might take.
in recipient countries are stretched close to breaking point, seriously

undermining the efficacy of the relief and reconstruction effort. While
the international donor community can congratulate itself for a job well
done in responding to the 2004 Asian tsunami, the international commu-
nity should also recognize that greatly improved systems of international
donor coordination are needed.
Sadly it is inevitable that megadisasters will continue to threaten the
lives of hundreds of thousands of people in developing countries in the
coming decades. National governments must pay a great deal more atten-
tion to developing strategies to deal with them that are broad-based, par-
ticipatory and cost-effective. And donors, too, need to improve planning
and delivery systems both to help developing countries themselves prepare
for the inevitable disasters that will occur, and to ensure that the donor
community can respond in a far more effective way when disaster strikes.
NOTES
1. For references to the very considerable literature on coordination issues which arise
in the delivery of post-tsunami aid, see the annotated document review prepared
by Cosgrave and colleagues (Cosgrave et al. 2009). See also the useful discussion in
Masyrafah and McKeon (2008: 24–34).
2. Numerous reports on the operations of the World Bank Multi Donor Fund (MDF) are
available on the MDF website at http://www.multidonorfund.org/index.html, accessed
17 July 2009.
3. Myrdal (1968: 10–16) presents a prescient discussion which emphasizes security con-
cerns of western countries at the end of the 1960s that influence the approach of western
countries towards developing countries.
4. Roland Wilson, ‘US sees aid to Muslim victims as chance to improve image’, The
Times, 3 January 2005. Similar reports were carried widely in other international media
outlets. For example, Richard W. Baker (2005), special assistant to the US President
at the time, discussed the issues in an op-ed piece in the Canberra Times noting that the
subject needed to be ‘carefully and sensitively handled’.
5. Bennett et al. (2006: 40) note that in the period following the tsunami, ‘The interface
between the Government of Indonesia and international actors was somewhat prob-
lematic. The role of the UN in East Timor was still fresh in the minds of many govern-
ment officials . . . .’
6. Additional details of the main changes in the Australian assistance program in
Indonesia in the post-tsunami period are provided in a recent OECD review of the
Australian aid program (OECD 2009: 97–104).

7. The notion of ‘generosity’ is something of an issue. Edward Aspinall (2006) spoke of

‘the orgy of self-congratulation about “Australian generosity” that quickly dominated
discussion of [the Indian Ocean tsunami] in this country’. See also the discussion in
Appendix 3.1 above.
8. http://www.oecd.org/dataoecd/11/41/34428351.pdf
9. A Fact Sheet issued by USAID in July 2005 noted that in Sri Lanka, ‘logistics, lack of
supplies, ethnic tensions, low-levels of development, and local regulations, in particular
in the buffer zone, have impeded the progress of the transitional shelter sector in eastern
Sri Lanka’. See USAID (2005).
10. For references to the very extensive literature on the issue, see Cosgrave et al. (2009).
11. The World Bank Decentralisation Support Facility provided regular reports on the level
of conflict in Aceh Province. See the references to the World Bank reports for the period
from mid-2005 to mid-2008 provided in Cosgrave et al. (2009: 307–19), items 537–66.
12. Quoted in TGLL (2009: 37–38).
13. For a discussion of ‘voice’ in the context of delivering public services in developing
Asian countries, see Schiavo-Campo and Sundaram (2000: 509). See also Wall (2006)
for a discussion of information and communication issues.
14. In the case of Sri Lanka, for example, estimates indicated that at least 100 000 addi-
tional workers were required, including about 13 000 masons, 2000 carpenters, 2500
painters, and nearly 54 000 unskilled labourers (Jayasuriya et al. 2005: 38).
15. This is the so-called ‘small country’ case in economic analysis where, because the
economy of a country is small compared to the world economy, economic changes
within the relevant country do not affect world prices of tradable goods.
16. It should be noted that references to inflation in this context refer to one-off price
increases rather than a sustained process of continuing increases in the general price
level which extends over a period of time.
17. Recent experience in Pakistan, the US (hurricane Katrina), and even in Indonesia after
the Yogyakarta earthquake in 2006 indicates that sharp construction cost increases in
disaster zones are common.
18. For various reasons, such as local political factors, it may not be possible sometimes to
import certain factors of production. In the case of the construction sector, for example,
it is usually possible, in principle, to import skilled labour from other countries. In Sri
Lanka following the tsunami, there was a suggestion that skilled labour shortages in the
construction sector should be met by importing skilled labour from India. However this
proved to be politically unacceptable.
19. The reasons for the sharp (and somewhat surprising) increase in the price of timber are
discussed by Nazara and Resosudarmo (2007).
20. See Corden and Neary (1982) and Corden (1984) for an outline of a basic analytical model
for Dutch Disease. A booming sector also generates expenditure effects which raise the
overall demand for goods and services. But higher demand does not always translate into
higher prices in the case of (internationally) tradable goods. Generally, such goods can
be imported at more or less exogenously fixed world prices while domestically produced
and consumed goods (non-tradable goods) tend to experience off-setting price increases.
Hence, tradable goods experience cost pressures from booming sectors but do not get
much of an offsetting effect from higher income–expenditure related demand increases.
As a result the relative price of non-tradables to tradables increases. This fall in the rela-
tive profitability of tradable industries is the standard ‘real exchange rate appreciation’
that is a necessary and unavoidable outcome of foreign capital absorption by the domes-
tic economy. This can be minimized in the short term through foreign exchange market
interventions and other sterilization measures, but cannot be entirely avoided.
21. Explanation of terms: (1) Here, there is a distinction between ‘tradable’ and ‘non-
tradable’ goods. These goods have the very important difference that ‘tradable’ goods
(for example, oil) are traded freely in world markets and thus have their prices set in
world markets. However, ‘non-tradable’ (or ‘non-traded’) goods are not traded in
world markets and have their prices set within a country. (2) For most countries, there

Conclusion 257
are two types of ‘tradable’ goods – ‘imported tradables’ (also known as ‘importables’)
and ‘exported tradables’ (also known as ‘exportables’). (3) However, whether any trad-
able good is an ‘importable’ or ‘exportable’ good depends on the particular country
being considered – for example, oil is an ‘importable’ (or imported tradable) for Japan
but is an ‘exportable’ (or exported tradable) for Saudi Arabia.
22. The assumption is that the recipient country is a ‘small’ country in world markets so its
international transactions do not have a significant impact on world market prices.
23. The regional economy of the disaster affected area may be considered as a distinct entity
within the broader national economy that has a fixed exchange rate with the rest of the
economy. Then, the same considerations apply for funds coming into the region from
within the country itself.
24. In the immediate aftermath of the tsunami in Sri Lanka there were euphoric expecta-
tions of massive capital flows, peace, and economic prosperity. In this atmosphere, the
Sri Lanka rupee appreciated (see Figure 5 in Weerakoon et al. (2007)). Subsequently,
the government appeared to have used tsunami aid funds to prop up the currency for
political reasons. Such a policy also implies slower absorption (expenditure) of foreign
assistance, which reduces domestic cost pressures.
25. In the longer term, higher expenditures by the ‘profiteering’ groups who gain these
higher incomes will tend to raise costs throughout the economy, thereby tending to
squeeze profits in export and import competing industries. In contrast, the availability
of services from reconstructed infrastructure and other assets has an offsetting impact
in the future on costs, facilitating increased supplies. Thus, investment in domestic
capital stock tends, in the first instance, to produce a real exchange rate appreciation.
Later, improved international competitiveness may be expected once the capital assets
begin to provide services used in the tradable industries.
26. The incentives for people to take up training in new skills depend on expectations and
incentives. In Thailand, Nidhiprabha (2007) observed that many people were reluctant
to undertake training programs to acquire new skills because they expected to go back
to their previous jobs in fisheries and tourism relatively quickly. On the other hand,
anecdotal evidence from Sri Lanka suggests that many unemployed people were willing
to undertake training in simple construction sector skills.
27. This is a more general point that applies to the spending of all types of financial flows
– including development aid – that expand the productive capacity of an economy. It
should also be mentioned that all economic agents are likely to perceive that the boom
is a temporary phenomenon. The boom is therefore unlikely to generate future unem-
ployment later due to downward rigidity of wages and prices when the boom ends.
28. See, for example, the extensive list of reports and conclusions from workshops listed
on the Tsunami Evaluation Coalition website: http://www.tsunami-evaluation.org/
Other1Evaluations1and1Reviews/Lessons1Learned.html, accessed 31 July 2009.
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Index
Abraham Lincoln, USS 234 international, see international aid/
accountability 17–18, 61, 237–8 assistance
Ace, R. 73, 85 media coverage 66–7
Aceh 24, 25–6, 68–9, 70, 118–19 objectives, see objectives of aid
before the tsunami 71–3 donors
conflict and freedom movements official reporting 65–6
74–5 Sri Lanka 123, 149–51, 163
economic conditions 72–3 aid utilization rate 150
cash-based programs 60 stage of response and mode of 164
impacts of the tsunami 75–83 supply side issues, see supply side
new provinces 92–3 issues
peace agreement 26, 91–3, 118, terms of assistance 42–3
242–3 Thailand 189–96
see also Indonesia evaluation 209–16
Aceh Barat Selatan 93 varied definitions 54
Aceh Leuser Antara 93 aid dependency 214–15, 217, 223
Aceh Monitoring Mission 92 airlines 186–7
Aceh-Nias Rehabilitation and Annan, K. 76
Reconstruction Agency, see Badan anxiety 205–7
Rekonstruksi dan Rehabilitasi Asian Development Bank (ADB) 42,
(BRR) 85, 104–5, 126, 127, 152
actors, multiplicity of 8, 230–31 Asian Disaster Preparedness Center
additionality of aid 44–7, 49 (ADPC) 188
adjustment 198–200 Asian Tsunami Fund 85
administration 16, 36; see also asset losses
coordination Indonesia 78–80, 81–2
Ahtisaari, M. 91 Sri Lanka 123, 124–7
agriculture 72, 81–3, 99 Thailand 171, 172, 174–6, 198, 199
aid/assistance 2, 3 Athukorala, P. 72, 76, 84, 88, 89
additionality 44–7, 49 audit reports 48–50
coordination, see coordination Australia 85, 233
cross-cutting issues 24–8 audit reports 49–50
delivery of, see delivery of aid/ foreign policy objectives 234–5
assistance Australia–Indonesia Partnership for
demand side issues 29–30, 32–3, Reconstruction and Development
34–5 (AIPRD) 49–50, 234
effectiveness, see effectiveness of aid/ Australian Agency for International
assistance Development (AusAID) 14,
finance, see finance/funding 52–3
government, see government Australian National Audit Office
assistance (ANAO) 22–3, 49–50
261

262 Index
Badan Pusak Statistik (BPS) 71, 73 Centre for National Operations (CNO)
Badan Rekonstruksi dan Rehabilitasi 127, 152, 167
(BRR) 19, 54, 90–91, 93–4, 102, charity foundations, see non-
232 governmental organizations
challenges 107–17 (NGOs)
coordination and commitments children 243–4
107, 114–17 assistance to in Thailand 194, 195
exit strategy 107, 117 China 68, 69
managing expectations 107, Clinton, Bill 18, 19, 31, 40, 60–61, 243,
108–10 244, 253
spending 107, 110–14 coherence, lack of 231–3
Executive Agency, Advisory Board commitments
and Supervisory Board 90–91, Indonesia 85, 114–17
114–15 Sri Lanka 149–50, 151
Banda Aceh 1–2, 231 communication, problems of 236–7
Banda Aceh–Meulaboh road 104, 107 community participation 89–90, 243
Bank of Thailand 182 community satisfaction 30, 32–3, 34–5,
Bappenas 88, 89 36
Batha, E. 53 community self-reliance 43–4, 83, 84,
benchmarks for evaluating aid 31 119
Bennett, J. 229, 231, 232, 233, 244 conditionality 42–3
Bernhard, R. 2, 191 conflict
Brennan, R.J. 227 Indonesia 74–5, 88–9, 242–3
bridges 132, 133, 175–6, 177 peace agreement 26, 91–3, 118,
broken promises 236, 238 242–3
Brusset, E. 6, 21, 27, 29, 57–8 Sri Lanka 124, 125, 139–41, 143,
Buckley, R. 235 162, 165, 242–3
buffer zone 134–5 construction boom 245, 247–8, 252
‘build back better’ approach 3, 28–9, construction cost escalation 4–5, 8–9,
57–8, 246, 251–2 248–9, 252–3, 254
Indonesia 86–7 Indonesia 97–9, 248
Thailand 212–13, 222–3 Sri Lanka 142, 155–9, 165, 248–9
building materials’ prices 97, 98–9, 155, Thailand 183–4, 249
158, 159, 184 Consultative Group on Indonesia
bureaucracy 52, 246 (CGI) 85
Bush, G.W. 234 consumption smoothing 200–201
business enterprises coordination 4, 8, 18–22, 36, 230–38,
Indonesia 82 253–5
SMEs in Sri Lanka 143, 145–7 differences in objectives 233–6
Thailand 181–2, 187, 193–4 Indonesia 88, 107, 114–17, 118,
232–3
Carter, W.N. 48 lack of coherence 231–3
cash for work (CFW) programs 59, 60, lessons learned 254
241 managing expectations 236–7
cash transfers 8, 59–61, 114, 164, 241 multiplicity of actors 230–31
Sri Lanka 128, 134, 136, 147–8 oversight of financial arrangements
Thailand 210–11 237–8
Caulfield, T. 26–7, 240, 243, 244 Sri Lanka 139, 145, 151–5, 164–5
Center for Nursing Advocacy 21 coping with post-tsunami reality
Central Bank of Sri Lanka 146 198–200

Index 263
coral reefs 187–8 demand side issues 29–30, 32–3, 34–5

corruption 22–3, 155, 163–4, 246 depression 205–7
Cosgrave, J. 6, 17, 18, 21, 43, 56, 228, De Silva, D.A.M. 24
238 developing countries 14
costs 254 costs of natural disasters 14
construction cost escalation, see risk reduction 14–16
construction cost escalation risks from natural disasters 12–13
inflation 4–5 disaster management planning 14, 119
counselling 35, 149 disaster risk reduction 6, 13–16, 225
Cox, A. 20, 21, 55 displacements 2, 3
credit/loans 42–3 Indonesia 75–8, 96
access to in Sri Lanka 145–8 Sri Lanka 124–5, 126, 133–4
Thailand distribution of aid 250–51
access to 200–201 diversion of funds 252
business enterprises 181–2, 187, doctors 21–2
193–4 Dollery, B. 59, 241
determinants of loan demand donor agencies
201–5, 221 coordination between in Sri Lanka
credit markets 193–4 151–2, 153–4
credit rating 162 difficulty of coordinating 232–3
cross-cutting issues 16, 24–8, 35 see also international non-
delivery of aid/assistance 242–5 governmental organizations
differences in objectives 235–6 (INGOs); non-governmental
currency depreciation 131 organizations (NGOs)
Donor Assistance Databases (DADs)
deaths 2, 3 55
Indonesia 2, 3, 68–9, 75–8 donor-built housing reconstruction
Sri Lanka 3, 123, 124–5, 126 134–42
Thailand 3, 172–4, 198, 199 donor/community mismatches 8, 89,
debt moratorium 84–5 107
Deep Ocean Assessment and Report of Doocy, S. 60, 241
Tsunami (DART) buoy 188 Downer, A. 233
delays in spending 22–3, 51–2, 57, 246, downward accountability 17–18
252 drinking water 103, 105, 133
Indonesia 110–12 Drury, A. 18
delivery of aid/assistance 35, 238–53, Dutch Disease effects 24, 249–53
254–5
community satisfaction and 34–5 early warning systems 119, 188–9,
construction cost escalation 248–9 218
cross-cutting issues 242–5 Earthquake and Tsunami Emergency
Dutch Disease and reconstruction Support Project (ETESP) 85
249–51 earthquakes
financial considerations 245–7 India and Pakistan, October 2005
impact of financial flows 247–8 227
Indonesia 83–4 Indian Ocean 1, 68, 70, 188
Sri Lanka 151–5 Nias 69, 70, 75–83
Thailand 191–3 economic impacts of the tsunami
trade-offs, see trade-offs Indonesia 80–83
types and timing of aid 238–42 Sri Lanka 128–32, 159–62
demand for credit 201–5, 221 Thailand 179–81, 216

264 Index
economic policy 128–31 sources of 42, 45

education spending, see spending
Indonesia 102, 103, 104 Sri Lanka 46, 149–51
see also schools needs assessment 126–7
effectiveness of aid/assistance 30–36, see also aid/assistance
53–4 fiscal accounts 130, 131, 159–60
Thailand 209–12 fisheries
efficiency 191–2 Indonesia 81, 82–3, 99
elections 93, 160 Sri Lanka 142, 143–5
emergency relief, see relief Thailand 175, 176, 192, 203
employment 99–102 fishing boats 144–5, 166
changes in occupations 200, Flint, M. 42, 48
202–5 Food and Agriculture Organization
see also livelihoods (FAO) 82–3, 188
employment programs 184, 185, 204–5, foreign policy 234–5
211, 217 Free Aceh Movement (GAM) 74–5,
environmental concerns 27, 244–5 91–3, 242
coral reefs 187–8 Freeman, P.K. 16
illegal logging 27, 98–9 frictions between aid organizations
equity issues, see inequity 21–2
exchange rate 160–61 friends and relatives, assistance from
exchange rate policy 250 201–2
exit strategy 107, 117 Fritz Institute 30, 32–3, 34–5
expectations, managing 107, 108–10, Fulu, E. 27
236–7 fundraising 56
external sector 129, 131
GAM (Free Aceh Movement) 74–5,
families’ need for information 240 91–3, 242
fear, tourists’ 208–9, 222 GDP 72, 129, 131–2
field survey of affected communities GDP growth
(Thailand) 196–209, 221–4 Indonesia 83
evaluation of assistance 209–16 Sri Lanka 123–4, 159, 160
finance/funding 35, 40–67, 254 Thailand 172, 179–81
coordination of financial gender issues 26–7, 243–4
arrangements 237–8 ghosts, fear of 208–9
delivery of aid 245–7 ‘golden hour’ 229
funding by donor and recipient 42, government agencies, coordination
46 among 151–3
funding gaps 116, 150–51 government assistance 35, 42, 43–4, 45,
impact of financial flows 247–8 209–10
initial response 41–8 Indonesia 84, 86, 87, 92
additionality 44–7, 49 Sri Lanka 151
financial flows 47–8 Thailand 181–2, 191–2, 209–10
mobilization of funds 41–2 Goyder, H. 42, 48
other assistance flows 43–4 Grameen Foundation 194
terms of assistance 42–3 grants 42–3
Indonesia 42, 44, 46, 84–7, 116–17
issues 22–3, 54–61 Harvey, P. 59, 60, 241
overall estimates of funding 42, Hasan, N. 236
45 He, B. 242

Index 265
health facilities incomes 34

Indonesia 80, 81, 102–3, 105, 106 Sri Lanka 142–3
Sri Lanka 132, 133 Thailand 198–200, 202–4
Helsinki Memorandum of see also wages
Understanding (MoU) 91–2, 93 Inderfurth, K.F. 3–4
home-owner-driven housing India 3, 46, 58, 68, 69, 227, 243
reconstruction 134–42 local communities’ views on
hotels assistance 33
occupancy rate in Thailand 186, Indian Ocean earthquake 1, 68, 70,
187 188
Sri Lanka 124–5, 143 Indonesia 2–3, 9, 68–122, 227
housing 8, 34–5, 240, 241–2 Australian foreign policy and
Indonesia 234–5
damage 78–9, 80, 81 before the disasters 71–5
managing expectations 109–10 BRR, see Badan Rekonstruksi dan
reconstruction 94, 96–9 Rehabilitasi
Sri Lanka 124 cash transfers 60
cost escalation 155–9 challenges 107–17
damage 124–5, 126 conflict 74–5, 88–9, 242–3
housing policy 134–7 peace agreement 26, 91–3, 118,
reconstruction 132, 133–42 242–3
Thailand construction cost escalation 97–9,
community perceptions and ‘build 248
back better’ 212–13, 222–3 coordination 88, 107, 114–17, 118,
damage 174, 175 232–3
reconstruction 182–3 finance/funding 42, 44, 46, 84–7,
Hovanesian, A. 20, 21, 55 116–17
human losses, see deaths; missing foundations for recovery 87–93
persons immediate response 83–7
Hyogo Framework for Action (HFA) rescue and relief 83–4
14 impacts of the disasters in Aceh and
Nias 68–9, 75–83
identification of bodies 178 economic impacts 80–83
illegal logging/timber 27, 98–9 human losses and displacement 2,
immediate response 2–3, 238–40 3, 68–9, 75–8, 96
finance 41–8 physical impacts 78–80
Indonesia 83–7 housing, see housing
Sri Lanka 123, 127–8, 163 infrastructure, see infrastructure
Thailand 176–9, 216 land titles 94–6
impact of the tsunami 1–2 livelihoods 77, 79, 94, 99–102
and the Nias earthquake in local communities’ views on
Indonesia 68–9, 75–83 assistance 32
Sri Lanka 123, 124–7 Master Plan 89–90, 109, 115
Thailand 171, 172–6, 177, 198, rehabilitation, reconstruction and
199 recovery 93–107
imports 72, 250, 251 schools and health facilities 80, 81,
prices of imported building materials 102–4, 105, 106
155, 159 spending 51, 52, 54, 107, 110–14
in-kind aid/assistance 59, 164, Indrawati, S.M. 90
245–6 Indriatmoko, Y. 245

266 Index
inequity International Federation of Red

Sri Lanka 124, 138–41 Cross and Red Crescent Societies
Thailand 192–3, 196 (IFRC) 13
inflation International Meeting on Good
Indonesia 72, 73 Humanitarian Donorship 17
Sri Lanka 130, 131, 160 International Monetary Fund (IMF)
infrastructure 5, 231, 241–2 85
Indonesia international non-governmental
damage 79–80, 81 organizations (INGOs) 19, 35
poor in Nias 74 Sri Lanka
reconstruction 94, 104–7 coordination between 151–2,
Sri Lanka 153–4
damage 124–5, 126 urged to transfer funds to the
reconstruction 132–3 government 142
Thailand 175–6, 177 international responses 2–3, 227–8
reconstruction 178, 181, 182–3 International Strategy for Disaster
initial response, see immediate Reduction (ISDR) 6, 12, 14, 15,
response 225, 253
Institute for Construction Training and INTOSAI 55–6, 61
Development 155, 158 investment/GDP ratio 159
Institute for Economic and Social Islamic Development Bank 42
Research (LPEM) 82
Institute of Policy Studies (IPS) 4 Japan 13
tsunami surveys 135, 169–70 Japan Bank for International
institution building 14–16 Cooperation (JBIC) 126, 127, 152
insurance 193–4, 218 Japan International Cooperation
international aid/assistance 2–3, 7–8, Agency 104
65–7, 228 Jayasuriya, S. 4, 53, 54, 58, 123
additionality 44–7, 49 job training programs 184, 185, 204–5,
by donor and recipient 42, 46 211, 217
Indonesia 83–4, 87, 89, 114
initial response 41–8 Kalla, J. 243
media coverage 66–7 Kelaher, D. 59
mobilization of funds 41–2 Kilby, P. 226
need to improve the response of the Kivikuru, U. 227
donor community 253–5 Kuncoro, A. 91, 110, 115
official reporting 65 Kunreuther, H. 193
Sri Lanka 123–4, 149–51 Kuntoro, M. 89
supply side issues 17–29
terms of assistance 42–3 labour
Thailand 189–91, 192, 218 costs 97, 98, 155, 158
see also aid/assistance imports of skilled labour 251
International Conference on Lampman, J. 67
Promoting Financial land ownership disputes 196
Accountability in Managing land titles 94–6
Funds Related to Tsunami, large enterprises 181–2, 193
Conflict and Other Disasters lateral accountability 17–18
23 lessons learned 253, 254–5
International Development Law Levin, C. 234
Organization (IDLO) 27, 244 liaison officers 113–14

Index 267
Liberation Tigers of Tamil Eelam market access 218

(LTTE) 124, 125, 242 Marulander, H. 229
coordination with 151–2, 154 Master Plan (Indonesia) 89–90, 109,
linking relief, rehabilitation and 115
development (LRRD) 6, 21, 29 Masyrafah, H. 6
livelihood support programs 34, 240, Maxwell, J. 58
241–2 McCawley, P. 65
peace agreement in Indonesia 92 McKeon, J.M.J.A. 6
Sri Lanka 147–8 media coverage 66–7, 227–8
livelihoods Megawati, S. 75
Indonesia mental health problems
damage 77, 79 Indonesia 103
reconstruction 94, 99–102 Sri Lanka 148–9
Sri Lanka 142–8 Thailand 194–5, 205–7, 221
Thailand 198–200 mental stress index 205–6
changes in occupations 200, 202–5 microfinance
damage 174–5 Sri Lanka 146–7
reconstruction 184, 185 Thailand 194, 201
loans, see credit/loans military assistance 83, 239–40
local communities 7, 8, 16, 225 minimum funding requirements 116
field survey of affected communities missing persons
in Thailand 196–209, 221–4 Indonesia 78
evaluation of assistance 209–16 Thailand 172–4
IPS surveys in Sri Lanka 135, mobilization of funds 41–2
169–70 prioritized over spending 56–7
participation in relief and Moken community 197, 198, 200, 202,
rehabilitation 89–90, 243 215–16
satisfaction and aid delivery 29–30, Montgomery, R.D. 244–5
32–3, 34–5, 36 Multi Donor Fund (MDF) 28, 85, 86,
local disaster organizations, national 87, 232
network of 14–16 multiplicity of actors 8, 230–31
local economies 240 Muslim world 234
local governments Myanmar 8, 10
Indonesia 74, 88 Myrdal, G. 229
BRR coordination with 115
BRR exit strategy and 117 Nargis cyclone 8, 9–10
BRR joint secretariats with Nasution, A. 44
113–14 National Development Trust Fund
local knowledge 119 (NDTF) 146–7
local preparedness 225–6 national disaster council 16
local responses 2–3, 34, 226–7, 254 national development management
lack of recognition 229 office 16
local self-help assistance 43–4, 83, 84, National Disaster Warning Center
119 (NDWC) 188
long-term sustainability 27–8, 36 national institutions, establishing
Lugar, R. 234 14–16
National Land Administration Agency
macroeconomic management 165 (BPN) 95
Maldives 46 national network of local disaster
Marianti, R. 14, 16 organizations 14–16

268 Index
national ownership of aid programs Office for the Coordination of

238 Humanitarian Affairs (OCHA)
national response 2–3, 227 54, 84
natural disasters official reporting 65–6
early warning systems and local Operational Military status 75
knowledge 119 owner-driven housing programs
frequency in most-prone countries 134–42
68, 69 ownership of aid programs 238
Indonesia 68, 69 Oxfam 236
major disasters since 1975 12, 13
Nazara, S. 226 Pacific Basin 68
net official development assistance (net Pacific Tsunami Warning Center 188
ODA) 65–6 Pakistan 227
New York Times 21 Paris Club 84
Nias 70 Paris Declaration on Aid Effectiveness
before the disasters 71–2 238
economic conditions 73–4 Parker, R. 14
BRR staff 108 Pasi village, Aceh 236–7
earthquake 69, 70 Patton, M.Q. 71
impact of earthquake and tsunami Pauly, M. 193
75–83 peace agreement (Indonesia) 26, 91–3,
tsunami 68–9 118, 242–3
see also Indonesia peace-keeping 25–6, 242–3
Nidhiprabha, B. 249 Perdana, A.A. 58
nominal effective exchange rate Perlez, J. 21
(NEER) 161 permanent shelter 34; see also housing
nominal objectives 8, 17–18 Philippines 68, 69
non-governmental organizations piers 176, 177
(NGOs) 35, 228 policy
coordination between in Sri Lanka mainstreaming disaster reduction
151–2, 153–4 policy 14–16
criteria for evaluating 31 staging issues and policy
Indonesia 87, 88, 116 considerations 228–30
Thailand 209–10 post-traumatic stress disorder (PTSD)
perspectives and role 213 205–7
non-humanitarian goals 36 Post-Tsunami Operation Management
non-tradable goods 250, 256 Structure (P-TOMS) 154
North Sumatra 68, 73–4, 98, 245 poverty
Nowak, B.S. 26–7, 240, 243, 244 disaster risk and 14, 15
nurses 21–2 Indonesia 73–4, 83
Powell, C. 234
objectives of aid donors 8, 254 preparedness 218, 225–6
differences in 233–6 Principles and Good Practice of
nominal and real 8, 17–18 Humanitarian Donorship 17
O’Callaghan, P. 58 private sector assistance 42, 44, 45
occupations, changes in 200, 202–5; see Indonesia 85–6, 87
also livelihoods Thailand 189–91, 209–10
Oddone, R. 66 psychosocial support 35
OECD 65, 67 public assistance, and private
Oey-Gardiner, M. 27 companies 193–4

Index 269
quality impact of the tsunami 125, 126

of aid/assistance income recovery 143
quality–quantity trade-offs Thailand 172–6, 177, 192–3
57–8 rehabilitation 23–4, 25, 238–9, 240–42
quality–speed trade-offs 28–9, 30, Indonesia 88, 93–107
246 Sri Lanka 132–63
spending choices 52–3 Thailand 181–9
spending process 53–4 Reid, A. 242
Thailand 209–12 relatives and friends, assistance from
fishing boats and equipment repairs 201–2
144–5 relief 3–4, 6, 23–4, 25, 238–40
housing in Sri Lanka 141 Indonesia 83–4
quantity of aid 48–52 Sri Lanka 127–8, 163
quantity–quality trade-offs 57–8 Thailand 176–9
Thailand 209–12 relocation housing program 137–42
remittances 44, 161
railways 132 reporting 61
Ramkumar, V. 55 rescue 83–4
reactive approach 225–6 Resosudarmo, B. 72, 76, 84, 88, 89, 91,
real effective exchange rate (REER) 110, 115, 226
161 resource constraints 14
real objectives 8, 17–18 response to disaster 2–5, 12–39
reconstruction 4–5, 23–4, 25, 238–9, aid effectiveness 30–36
240–42 demand side issues 29–30
challenges 119 immediate, see immediate response
Dutch Disease and 249–51 literature review 12–16
Indonesia 93–107, 118 stages of, see stages of response
Sri Lanka 124, 132–63 supply side issues, see supply side
Thailand 181–9, 216–17 issues
trade-off between pace and amount retreat of the sea 76–7
251–3 Rice, R. 24
Reconstruction of the Aceh Land Rizal, S. 229
Administration System (RALAS) ‘Ring of Fire’ 68
95 roads
Reconstruction and Development Indonesia 104–7
Agency (RADA) 136, 141–2, Sri Lanka 132–3
152–3 Thailand 175–6, 177, 178
recording systems 55–6
recovery safety, tourists’ perceptions of 208–9,
Indonesia 93–107 222
foundations for 87–93 sanitation 103, 106, 133
Sri Lanka 132–63 Scheper, E. 19, 26
targets 132 schools
Thailand 181–9 Indonesia 80, 81, 102, 103, 104
Recovery Aceh-Nias Database Sri Lanka 132, 133
(RAND) 21, 55 attendance 149
Red Cross 142 Thailand 194
regional variation Schwartz, E. 3, 253
Sri Lanka searches 178
housing progress 139–41 security exchange index (SET) 179

270 Index
self-help assistance 43–4, 83, 84, 119 IPS tsunami surveys 135, 169–70
Sen, A. 47 livelihoods 142–8
Sen, K. 90 local communities’ views on
sequencing of emergency and recovery assistance 32
activities 93–4, 226 mental health problems 148–9
shelter 34–5, 133–4; see also housing overall assessment 163–5
Simeulue Island 68, 70, 76–7 rehabilitation, reconstruction and
skilled labour, imported 251 recovery phase 132–63
small and medium enterprises (SMEs) recovery targets and actual
143, 145–7, 187, 193 progress 132
social cohesion/tensions social cohesion 162–3
Sri Lanka 162–3 Sri Lanka Development Bonds 162
Thailand 196, 206 Srivastava, P. 58
social participation 89–90, 243 stages of response 7, 23–4, 25, 48,
Soehaimi, A. 68 226–30, 254
Soeharto, President 75 Indonesia 87–8
Soesastro, H. 73, 85 levels of response 226–8
soft loans 181–2 mode of assistance and 164
speed of response 229 policy considerations 228–30
Thailand 191–2, 210–11 stay length 209, 222
trade-off with amount of Steele, P. 123
reconstruction 251–3 Steer, L. 90
trade-off with quality 28–9, 30, 246 stock market 179
spending 48–54, 242 stress
controls over 54 Sri Lanka 148–9
delays in, see delays in spending Thailand 194–5, 205–7
Indonesia 51, 52, 54, 107, 110–14 see also mental health problems
lower priority than fundraising supply-driven assistance 217–18
56–7 supply-oriented donors 8, 254
quality 52–4 supply side issues 17–29
quantity 48–52 accountability 17–18
quantity–quality trade-offs 57–8 coordination 18–22
Sri Lanka 149–51 cross-cutting issues 24–8
Thailand 191–2 finance 22–3
Sri Lanka 2, 9, 25–6, 54, 123–70, 227 objectives 17
aid/assistance 123–4, 149–51, 163 stages of response 23–4, 25
delivery and coordination 151–5 trade-offs in delivery 28–9
conflict 124, 125, 139–41, 143, 162, Susahana microfinance scheme 146–7
165, 242–3 sustainability 27–8, 36, 117
construction cost escalation 142,
155–9, 165, 248–9 targeting of aid/assistance 58–9, 164
economic impacts Sri Lanka 147–8, 164
broader 159–62 Task Force for Logistics, Law and
short-term 128–32 Order (TAFLOL) 128, 152, 167
funding 46, 126–7, 149–51 Task Force for Rebuilding the Nation
housing, see housing (TAFREN) 128, 152, 167, 232
immediate response 123, 127–8, 163 Task Force for Relief (TAFOR) 167,
impact of the tsunami 123, 124–7 232
damage by province 125, 126 Task Force for Rescue and Relief
infrastructure 124–5, 126, 132–3 (TAFRER) 128, 152, 167

Index 271
Telford, J. 4, 43, 56, 238, 244 tourism

terms of assistance 42–3 international responses and 227–8
Thailand 171–224, 227 Sri Lanka 143
aid and assistance 189–96 Thailand 216
to children 194, 195 assistance to tourists to return
delivery of assistance 191–3 home 178
foreign assistance 189–91, 192, foreign casualties 172–4
218 impact of the tsunami 171, 172,
public assistance, insurance and 179, 180, 184–5, 186
credit markets 193–4 incomes and changes in
construction costs 183–4, 249 occupation 203
economic impact 179–81, 216 reconstruction 184–7
evaluation of aid/assistance 209–16 tourist attitudes 207–9, 222
aid dependency 214–15 tracking of expenditures 22–3, 55–6
‘build back better’ 212–13 ‘Tracking Tsunami Resources and
quality, level and effectiveness Results’ database 21
209–12 tradable goods 250, 256–7
role of NGOs 213 trade liberalization 218, 250
field survey of affected communities trade-offs
196–209, 221–4 pace and amount of reconstruction
adjustment and coping 198–200 251–3
consumption smoothing and quality and quantity 57–8
access to credit 200–201 speed and quality 28–9, 30, 246
deaths and asset losses 198, training programs 184, 185, 204–5,
199 211, 217
determinants of loan demand transitional period 24
201–5 transitional shelters 133–4
methodology 196–8 transparency 22–3, 54–6, 237–8
immediate response 176–9, 216 transport 231
impact of the tsunami 171, 172–6, trauma 148–9, 194–5; see also mental
177, 198, 199 health problems
infrastructure 175–6, 177, 178, 181, Tsunami Evaluation Coalition (TEC)
182–3 4, 17, 18, 42, 48, 229–30
livelihoods, see livelihoods Tsunami Global Lessons Learned
mental health problems 194–5, Project (TGLL) 55, 226, 243
205–7, 221 tsunami recovery fund 182
rehabilitation, reconstruction and tsunami-related websites 20–21
recovery 181–9 Tsunami Victim Relief Center 176
social tensions/cohesion 196, 206 Tuli, P. 228
tourism, see tourism
tsunami warning system 188–9 UNCTAD 231–2
Thorburn, C. 242 United Nations 20
Thornton, P. 232 Global Assessment Report on
timber 245 Disaster Risk Reduction 12
costs 97, 98–9 OCHA 54, 84
illegal logging 27, 98–9 Risk and Poverty in a Changing
time period for funding 42–3 Climate 12, 14, 15
Times, The 234 workshop on lessons learned 230
timing of aid 238–42 United Nations Development
Tomar, R. 234, 235 Programme (UNDP) 27, 55, 232

272 Index
United Nations Environment Wolfensohn, J. 85

Programme (UNEP) 27 women 26–7, 243–4
United States (US) 67, 68, 69 World Bank 42, 48, 92, 152, 165, 232
audit reports and tsunami response Aceh 24
48–9, 50 damage assessment for Indonesia
foreign policy objectives 234 80–82
United States Government damage assessment for Sri Lanka
Accountability Office (USGAO) 126, 127
4–5, 49, 50, 248 debt relief for affected countries 85
upward accountability 17–18 inequitable distribution of aid and
USAID 107 reconstruction in Sri Lanka 5,
124
Van Griensven, F. 205, 207 tsunami website 5
World Conference on Disaster
wages 155, 158; see also incomes Reduction, Kobe 13, 14, 178
Waldman, R.J. 227 World Disasters Report 13
Wall, I. 236 World Food Programme 164
warning systems 119, 188–9, 218
warning towers 188 Yamao, M. 24
water, drinking 103, 105, 133 Yokohama Strategy for a Safer World
websites 20–21 13
Weerakoon, D. 123 Yudhoyono, S.B. 23
Wiharta, S. 231, 239 Yusuf, I. 93

The Asian Tsunami: Aid and Reconstruction After A Disaster

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26 December 2004

This book is dedicated to their memory.

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In collaboration with Bhanupong Nidhiprabha, Budy P. Resosudarmo

A JOINT PUBLICATION OF THE ASIAN DEVELOPMENT BANK

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All rights reserved. No part of this publication may be reproduced, stored in a

Edward Elgar Publishing, Inc.

A catalogue record for this book

Library of Congress Control Number: 2010922139

ISBN 978 1 84844 692 2

Printed and bound by MPG Books Group, UK

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and researchers including the hundreds of reports of project work imple-

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NGO Non-government organization

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UNOSE United Nations, Office of the Special Envoy for Tsunami

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Table 1.1 2004 Asian tsunami: estimated deaths and displacements

Country People lost Displaced

Note: (a) Includes Nias earthquake.

Source: USAID Fact Sheets (estimates).

disaster.3 The tsunami subjected the affected countries and communities to

The promised funding initially appeared to be more than adequate to

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However these early ultra-rosy assessments seemed rather overblown even

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The Tsunami Emergency Reconstruction Program I . . . ended on March 31,

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AIM OF THE STUDY

The broad aim of this study is to make a contribution to the task of

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● Who promised what?

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effects are discussed in Chapter 7. It is important to recognize that the

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Bernhard, Richard, Y.Yritsilpe and O. Petchkul (2005), ‘Corporate philanthropy

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www.reliefweb.int / rw / rwb.nsf / db900sid / MUMA-7RF7PQ ? OpenDocument,

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The response to a megadisaster such as the 2004 Asian tsunami raises

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Date Place Event Deaths Comment

whole is dependent on the parts.1 Much depends on what can be done by

● Ensuring that disaster risk reduction is a national and local

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● Establishing new national institutions

Implementation of each of these proposals is constrained both by

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BOX 2.1 UNITED NATIONS 2009 RISK AND

● Global disaster risk is highly concentrated in poor coun-